Small and medium enterprises marketing: innovation and sustainable economic growth perspective
Abdullah Promise Opute
Grounded on the sustainability thinking, this chapter provides a collection of core issues around small and medium entrepreneurship marketing discourse. The learning outputs from the chapter include:
■ Understanding the term and attributes of an entrepreneur;
■ Understanding the sustainability logic of entrepreneurial activity;
■ Understanding small and medium entrepreneurship marketing;
■ Recognising the important role of customer orientation and strategic marketing in SME marketing;
■ Understanding innovation approach to SME marketing;
■ Understanding howto optimise the economic growth impact of SMEs.
INTRODUCTION TO THE CHAPTER
Economies are facing intense challenges globally to figure out strategies for ensuring sustainable economic growth. One central priority in the sustainable economic growth focus is the need to curb the progressive rise in unemployment and underutilisation of skills. The importance of this economic focus has been recognised by United Nations Economic Programmes (UNEP). Indeed, the United Nations Sustainable Development Goals, which provides a blueprint for achieving a sustainable future for all by 2030, emphasise core sustainable economic growth indicators, for example no poverty (goal 1), zero hunger (goal 2), and decent work and economic growth (goal 8), among others. For developed and developing countries alike, small and medium-sized enterprises are instrumental to economic growth and sustainability.
Grounded in the strategic marketing foundation as a critical approach for customer orientation and boosting organisational performance, this chapter lauds the importance for innovation oriented SMEs. Given the aforementioned unemployment and skills underutilisation challenge, the pertinence for boosting and sustaining the economic growth and sustainability development impact of SMEs has become a prominent matter of interest to both academics and policymakers. On that background, the importance of the theoretical framing of this chapter cannot be underestimated. Next, ‘entrepreneurial marketing' and fundamental significance to this chapter’s theoretical framing is explained.
‘Entrepreneurial marketing’ (EM) - which ‘describes the marketing activities of small and new ventures’ (Kraus et al., 2010, p. 20) - has been lauded as an important issue given its significant role in the economic activities of such firms. Broadly viewed, EM does not necessarily relate to only small ventures, hence it is also conceptualised as ‘the proactive identification and exploitation of opportunities for acquiring and retaining profitable customers through innovative approaches to risk management, resource leveraging and value creation’ (Morris et al., 2002, p. 5). Thus, there are two perspectives of EM:
■ The quantitative perspective of entrepreneurial marketing which emphasises the quantitative aspect of the company as marketing for small and new ventures; and
■ The qualitative perspective of entrepreneurial marketing which stresses the qualitative aspect and portrays marketing with an entrepreneurial spirit (marketing by entrepreneurs).
Both perspectives are two sides of the same coin as marketing activities that are driven by entrepreneurial features (such as innovative, risk-oriented, and proactive spirit) are also relevant to quantitative characteristics (smallness and newness) (Kraus et al., 2010). While entrepreneurship is often connotated with innovativeness and risk-taking, it has been documented that small and new ventures are rarely innovative but rather imitative (e.g., Kraus et al., 2010), rarely technology oriented (e.g., ZEW, 2007), and not risk oriented (e.g., Bhide, 1999). Recognising these strategic shortcomings and negative economic growth impact, the focus in this chapter is on small and medium enterprises (SMEs). Invoking Kraus et al.'s (2010) theoretical framing which combined the definition of marketing of the American Marketing Association (AMA) and two conceptualisations of entrepreneurship (entrepreneurial orientation and entrepreneurial management), entrepreneurial marketing conceptualisation in this chapter reflects marketing activities that take into account innovativeness, risk taking, proactiveness, and strategic pursuit of opportunities towards profitably satisfying customers.
Next, small and medium-sized enterprises are explained, as well as their link to economic growth. Following that, customer orientation and strategic marketing are discussed. Thereafter, SMEs are explained from the point of innovation and sustainable economic growth. Then chapter conclusions are presented.
SMALL AND MEDIUM-SIZED ENTERPRISES (SMES)
AND ECONOMIC GROWTH
For developed, as well as developing, countries, small and medium-sized enterprises, as entrepreneurial ventures, are tremendous economic growth contributors. At this point, it is important to understand who the entrepreneur is. An entrepreneur has been defined diversely. In defining the term ‘entrepreneur1, contributors have used several attributes to capture the meaning of the term. Box 2.1 captures some definitions of an entrepreneur.
BOX 2.1: SOME DEFINITIONS OF AN ENTREPRENEUR
The entrepreneur is one who takes the risk of being self-employed (Canti I Ion, 1756), while Knight (1921) described the entrepreneur as one who takes non-quantifiable risks, and profits from such risk bearing. In another view, Weber (1930) described entrepreneurship as the expression of cultural values. In defining entrepreneur, Schumpeter (1931) emphasised the innovative attribute and posits that an entrepreneur is an individual experimenting with new combinations. Barth (1967) simply described the entrepreneur as a social agent for change.
Describing an entrepreneur, Kraus et al. (2010) portrays a perspective that incorporates strategic orientation and marketing logic and commented thus: ‘“entrepreneurship” is an adjective that describes an approach to marketing that embraces the opportunities of the marketplace in terms of an effective implementation of price, place, promotion, and product tactics (four Ps) by being risk-taking, innovative, and proactive’ (p. 21).
Taken together therefore, and from the business point, an entrepreneur is an individual who strategically organises or operates a business (or businesses) and ensures that the core marketing elements of products (or services), price, place, and promotion are effectively implemented towards profitably satisfying the customer. Armed with foresight, drive, and ambition, an entrepreneur takes risk and seeks to solve business or consumer problems. Some typical qualities of an entrepreneur include:
■ Being open-minded;
■ Being proactive;
■ Willingness to take risks;
■ Readiness to leverage an opportunity; and
■ Being innovative.
Being Open-Minded: Open-mindedness has been identified as a central attribute of an entrepreneur who desires to be successful. Even the smartest and most highly successful people stay open to new and diverse ideas, and this allows them to see opportunities ahead of them and better ways of solving problems. Staying open minded allows entrepreneurs to strategise effectively, taking into consideration the cues from varying viewpoints.
Being Proactive: According to Merriam-Webster, being proactive implies ‘acting in anticipation of future problems, needs, or changes’. Proactivity is a core operational feature of successful organisations. To optimise the business potentials, take opportunities, and compete effectively, an entrepreneur must be active and initiate carefully planned actions towards achieving desired goals.
Willingness to Take Risks: Risk taking is a core attribute of an entrepreneur. The willingness to take risk is the motivational component that prompts entrepreneurs to invest time and effort into seeking successful transformation of identified potential opportunities. Not taking risks can stifle a new business and hinder it from progressing beyond the infant stage. Entrepreneurs are however not blind risk takers; rather the risks are carefully thought out and the potential benefits weighed up.
Readiness to Leverage an Opportunity: An entrepreneur aims strategically to organise operational activities towards profitably satisfying the customer. Entrepreneurial decisions are therefore processed towards achieving positive outcome. Among others, decisions made include identifying and leveraging opportunities.
Being Innovative: Innovativeness is a core attribute of an entrepreneur. Success-driven entrepreneurs constantly search for innovations and new ways of reinventing their ideas. Whether innovations are internally or externally driven, entrepreneurs always push for new and better ways to process and implement their business plans and improve their value added creation by ways of marketing and or products based innovation strategies. To effectively grow their business through innovation, successful entrepreneurs reflect and adopt changes when necessary.
Given its instrumental importance to developed and developing economies, SMEs are increasingly being leveraged as economic activity medium (see Table 2.1). The plausibility of SMEs as economic growth contributors is also documented in Table 2.1.
Table 2.1 Small and medium-sized enterprises and economic impact
Small and medium businesses are growing in developed as well as emerging economies
Welsh et al. (2014)
As at 2007, there were 1,063,000 women entrepreneurs and 4,847,000 male entrepreneurs
Welsh et al. (2014)
The Global Entrepreneurship Monitor Women's Report (GEM) documents over 100 million women in 59 countries launched and grew a new business venture in 2010. These countries represent more than 52%of the world's population and 84% of the world's gross domestic product (GDP)
Kelly et al. (2011)
The number of small and medium enterprises (women) is increasing and contributing to jobs and wealth in many societies
Brush et al. (2010)
Small and medium (family) business is very much widespread around the world. Spain, Austria, Italy, Germany, Switzerland, Norway, and the United Kingdom are typical countries of the European Union with a high level of family business
Petlina and Koräb (2015)
Majority of companies belong to the sub-sector of family businesses and generate the most of new jobs in various countries
Ramadani and Hoy (2015)
Small and medium-sized enterprises aid economic growth in developed and developing countries
Mitchell and Reid (2000)
Small and medium-sized enterprises represent 99% of the global business population
Azudin and Mansor
In Malaysia, small and medium-sized enterprises represent 97.3% of registered businesses as well as contribute 36% of gross domestic product of the nation
Azudin and Mansor
Small and medium business (family businesses) contributed a 4.8%increase in total employment growth in the period 2006-2007 in Italy
Colombo et al. (2014)
Table 2.1 (continued)
Small and medium (family) businesses account for Donckels and Frohlich
more than two-thirds of all businesses and contribute (1991) significantly to wealth, competitiveness, and job creation in their countries;
estimates show that in the USA, 40 to 60% of the Ward and Aronoff (1991)
gross domestic product (GDP) is created by small and medium (family) businesses
Small and medium (family) businesses contribute to economic growth through technological development and expansion into foreign markets
Morck and Yeung (2003)
In India, small and medium (family) businesses generate about 79% Jobs and account for two-third of GDP
CUSTOMER ORIENTATION AND STRATEGIC MARKETING
The customer is visualised as being a king (Kennedy and Laczniak, 2016), hence the central focus of marketing is on the customer. In the modern day market landscape, customer orientation is a sine qua non for competing effectively in the market. Especially in this age of digital revolution where market boundaries are vastly disappearing through the enabling influence of multi-media devices in connecting to customers and across markets (Opute, 2017). Competing effectively in such digital norm requires an operational strategy that recognises the importance of drawing closer to the customer (Opute, 2020). For SMEs to effectively fulfil their role as sustainability and economic growth agents, they must be customer oriented.
Customer orientation implies the extent to which a firm channels its efforts towards responding effectively to the needs of the customer. An important marketing variable, customer orientation implies a customer driven business culture that culminates in best value creation for the customer. As Luo et al. (2008) note, the positive performance impact of customer orientation derives from the resulting trust. Building and consolidating this trust is of significant importance to SMEs that aspire to achieve sustainability and economic growth impact. Therefore, customer orientation may not only imply drawing closer to the customer but also cultivating long-term relationship with them. By doing both, organisations would position themselves to effectively build and consolidate trust.
Within the philosophy of employing a customer focus, a critical operational initiative relates to strategic orientation - a core enabler of entrepreneurial innovativeness (Kim, Kim and Yang, 2012). This importance of strategic orientation is recognised in this chapter, and in line with the entrepreneurial marketing emphasis in this chapter, strategic marketing is explained next.
The marketing landscape is increasing immensely in dynamism and challenges. Staying competitive in these circumstances requires organisations that are committed to embracing a suitable strategy to effectively respond to customers’ stimuli as well as environmental and competitor pressure. SMEs must embrace proactive strategic marketing initiatives that enable them to shape their goals and survival.
The concept of strategic marketing has evolved over the last few decades and has been enhanced by inputs from the domains of marketing, strategic management, and industrial organisation (IO) economics. According to Meyer (1991, p. 828), strategy is crystallised around one central question: ‘What causes certain firms to outperform their competitors on a sustained basis?’. Reinforcing and extending that substance, Varadarajan (2010, p. 133) proposed the following as issues fundamental to strategic marketing: (1) What explains differences in the marketing behaviour of competing businesses in the marketplace? and (2) What explains differences in the marketplace and financial performance of competing brands/product lines/businesses?
The underlying thesis of this chapter is that SMEs can be major actors in the wheel of sustainability and economic growth. To fulfil economic growth role, they must embrace customer orientation and critically ensure a suitable strategic marketing approach. Given the increasing dynamism in the modern day marketplace, characterised by tremendous technology revolution, a robust strategic marketing strategy approach that outplays competitors in adequately creating value for customers is essential. Such a strategic marketing approach would yield desired financial performance that drives and sustains economic growth impact of SME. Recognising aforementioned issues fundamental to strategic marketing, this chapter invokes Varadarajan's (2010, p. 126) viewpoint - strategic marketing encompasses organisational, inter-organisational and environmental phenomena concerning:
■ The behaviour of organisations in the marketplace in how they interact with and respond to consumers, customers, and competitors stimuli as well as other external constituencies, in the operational efforts of creating, communicating, and delivering products and services that offer value to customers at a profit; and
■ The general management responsibilities from the point of the boundary spanning relationship of the marketing function with other interfacing functional areas in the organisations.
The centrality of customer value creation in driving organisational strategy is undisputed. Consequently, the strategic marketing designs of an organisation must align to that value creation focus. In other words, strategic marketing is one major tool for implementing the customer value creation plan of an organisation. Fundamentally, a core task of strategic marketing is to address the question of how the marketing strategy of a business is shaped by both demand side and supply side factors. Effectively negotiating this task requires a strategic marketing orientation that is proactively tailored to offer suitable responses to the multiple stimuli (customers, competitors, and external environment). SMEs must ensure a strategic marketing approach that pursues and leverages closeness to customers in effectively delivering best value to customers through product/service offers and use of suitable marketing strategy. To optimise strategic marketing effectiveness, organisations must also ensure appropriate marketing strategy, i.e., integrated range of decisions that reflect the organisation’s priorities concerning products (or services), markets, marketing activities, and marketing resources for creating, communicating, and delivery of products (or services) that meet the expectation of customers, and in so doing, meeting the objectives of the organisation. Essential in that strategic marketing orientation is an information seeking focus that enables SMEs to understand and respond effectively to competitors and other stimuli in the market.
For SMEs that have the operational capacity that involves functional boundaries, the strategic marketing activity will include also the optimal alignment of the functional areas towards symbiotic interdependence, effective marketing strategy implementation, and profitably satisfying the customer.
SMEs: INNOVATION AND SUSTAINABLE ECONOMIC GROWTH
A central underpinning foundation to the theoretical framing of this chapter relates to the entrepreneur-centred view, which contends that outcomes are contingent on the features and action models of key decision makers in SMEs. In that view, human agency is a critical factor that explains the strategic choices made for organisations. Thus, the entrepreneur-centred view challenges the assumption that SMEs strategic choices can be adequately explained by considering only a firm’s external contingencies and its structural characteristics (Geppert and Clark, 2003; Hsieh et al., 2019). Invoking the entrepreneur-centred view, the theorising of this chapter considers the individual entrepreneur or group of decision makers in SMEs as the focal point as discovering or enacting of opportunities are strategic actions within their functional tents. Being innovation oriented is a strategic approach that decision maker(s) in SMEs must embrace towards boosting their performance and economic growth contribution.
Innovative firms gain a competitive advantage over their competitors. SMEs have the potential to be a significant contributor to sustainable economic growth. When strategically maximised, that potential can lead to highly customer oriented SMEs that play a major role in the national economic wheel. Importantly, SMEs that achieve such a pivotal economic role do not only create employment and utilisation of skills in their immediate operational environment but also drive the economic wheel, nationally and even globally, by keeping the economic chain active, an outcome that creates employment opportunities and further lubricates the economic chain. Consequently, SMEs that attain this pivotal capacity undergo a cycle transformation.
To achieve that sustainable economic growth impact, SMEs must embrace innovative strategy in their operations. SMEs must be proactive, willing to take risks and embrace initiatives that enable them to become or remain innovative in ensuring effective customer orientation in a marketplace that is progressively gaining in intensity and dynamism. Innovation can take different forms (see Figure 2.1):
Figure 2.1 Types of Innovation for SMEs
Figure 2.2 Small and medium entrepreneurship marketing: an innovation and economic growth impact perspective
Product Strategy Innovation: Innovation is a critical component of product differentiation strategy and product innovation is a fundamental competitive strategy component (e.g., Hsieh et al., 2019). Product strategy innovation includes: ( 1 ) innovative product offering - creating products that are already existing in the market but with new and unique features that appeal to the interest of customers; (2) innovative product offerings that serve emerging markets; (3) innovative product offerings - creating new products that did not exist previously in the market; and (4) innovative and high value-added products that serve a worldwide clientele.
Marketing Strategy Innovation: Innovation can take the form of marketing strategy, whereby the SME adopts a proactive approach that embraces new and effective ways of creating awareness, promoting and distributing of products or services to customers beyond the geographical domain where the SME is located. There are two forms of marketing strategy innovation that SMEs can embrace towards contributing to sustainable economic growth: technology enhanced marketing and resource pooling marketing.
■ Technology Enhanced Marketing: This is a marketing strategy innovation approach where the entrepreneur leverages technology to boost the marketing of services or tangible products. The world is changing tremendously, and there is enormous power in the way technology and social media is used to drive marketing and in accessing market segments. Social media and technological devices offer entrepreneurs, including SMEs a medium for accessing markets beyond the geographical boundaries where the enterprise is situated. Using such technological and social media devices, entrepreneurships
(including SMEs) can access a pool of customers in diverse social groups, and also aid their internationalisation.
■ Resource Pooling Marketing: This is a marketing strategy innovation approach which involves a collaborative strategy where SMEs join forces with other firms in other locations who serve other product and market segments and leverage their network to help in marketing each other’s products or services in their individual market domains for their mutual benefit. SMEs can also gain international orientation through this approach as they, overtime, gain foreign market knowledge and perceptions of opportunities through their resource pooling marketing.
Figure two summarises the conceptual framework of this chapter. Organisation formation and innovation are not only core to the entrepreneurship construct (Schumpeter, 1942) but also a differentiator of what is and what is not entrepreneurial (Covin and Miles, 1999; Covin and Miller, 2013). Grounded in that foundation, this chapter points to the importance of innovation-based SMEs as a strategic way of responding effectively to the increasing pressure to achieving sustainable economic growth. While innovativeness is the ability to produce innovation, the strength of this ability is reflected by the emergent innovation process outcome, for example new product/service introductions (and new market penetrations), market acceptance, and sustainable economic growth generation input.
Achieving such sustainable economic growth input requires SMEs that are not only innovation oriented but also cultivate risk taking ability and proactiveness. SMEs must exhibit a persevering orientation that utilises knowledge seeking attitude to penetrate new market territories, an operational approach that has been proven to facilitate early and accelerated internationalisation of SMEs (Li et al., 2015; Hsieh et al., 2019). SMEs must be bold in their operational approach, show willingness to take opportunities, take a step into the unknown — exploiting networks and opportunities to access markets (including international markets), embracing new strategies of production and service and more effective ways of marketing products and services.
Within the proposed proactive drive, SMEs should embrace strategic marketing orientation that shifts from the traditional customer engagement to online and technology-based options towards improving the innovation of products and services. Additional to the customer engagement benefits, such online and technology-based strategic marketing options can be exploited to take advantage of opportunities, for example accessing customer and market segments beyond the geographical location of the SMEs - internationalisation.
Entrepreneurial activities drive economic growth, and SMEs contribute immensely in that connection. Achieving the economic growth impact of SMEs hinges however on the extent to which the entrepreneurial activities are effectively implemented towards profitably satisfying the customers. To fulfil their role as lubricants of the economic wheel of societies, SMEs must be strategically oriented, proactive, innovative, and risk taking, and exploit opportunities, not only in their product (or service) offerings but also in their marketing dynamics. SMEs must embrace an entrepreneurial strategy that recognises and leverages the nuances of exploratory and exploitative innovation to optimise their ability to profitably satisfy customers and impact economic growth.
- 1. Who is an entrepreneur? What are the characteristics of an entrepreneur?
- 2. What role do SMEs play in the economic growth of a country?
- 3. Explain the term 'entrepreneurial marketing1.
- 4. What role do you think customer orientation plays in SME marketing, and what steps can SMEs take in the way of recognising and leveraging the importance of customer orientation?
- 5. With digital revolution becoming a norm in the 21st century, market boundaries are vastly disappearing. What are the threats and opportunities of such development for SMEs?
- 6. Taking into consideration the dynamism in the 21st-century marketplace, what is the importance of strategic marketing to SMEs; identify critical strategic marketing steps that SMEs can take towards enhancing their competitive advantage.
- 7. Define and explain the importance of innovation to entrepreneurship. What innovative steps can SMEs take to enhance their value creation to customers and economic growth impact of SM Es?
- 8. Sustainability and economic growth will continue to be matters of importance to global economies: discuss what steps SMEs can take to effectively fulfil their role in the economic growth chain.
CASE STUDY:TOYOTA PRIUS: A CASE IN NEW PRODUCT DEVELOPMENT
"The Prius is solid evidence that the ponderous development process that produces new automobiles is finally on the brink of a genuine technological breakthrough."1
- Popular Science Magazine, July 1997
"We believe that clearing environmental hurdles and offering an attractive driving experience are critical for cars to thrive in the 21st century."2
- Hiroyuki Watanabe, Senior Managing Director,Toyota in 2003
In December 1997, Toyota Motor Corporation (Toyota) of Japan launched its hybrid vehicle Prius in the Japanese market. This was one of the first mass-produced hybrid vehicles in the world.The Toyota Hybrid System (THS) combined an internal combustion engine fuelled by gasoline with an electric motor.
Prius achieved a balance between high mileage and low emissions and was the upshot of the company's initiative to produce environment-friendly automobilesand its goal of manufacturing the'Ultimate Eco Car'.The Prius generated much enthusiasm in the industry as it was both efficient and stylish.
The car was known to be safe and conformed to Japanese environmental pollution standards. Having sold more than 100,000 units worldwide by 2002, it was the bestselling hybrid car model in the world.
Further refined models were introduced in 2000 and 2003. Prius was introduced in the US market in 2000, after Toyota conducted a study of the US market and consumer preferences. Leveraging the research findings, various strategies were developed for this market. The new improved Prius sold for same price as the original Prius.These strategies helped Prius to successfully penetrate the tough US market even though it was based on a new concept of a hybrid car. In 2001, the Automotive Engineering International recognised Prius as the 'world's best engineered passenger car'.
By 2002, it was being sold in North America, Japan, Europe, Hong Kong, Australia, and Singapore. Analysts opined that the demand for hybrid cars would rise because of the unstable oil prices and the growing need for environment friendly products.
Commenting on the future of green technologies and on Prius in particular, Chris Giller of Grist.org said,'In the marketplace, green technologies and industries are among the fastest growing and most innovative developments. The Toyota Prius has defied every prediction to become the must-have car. The organic food business doubles every time you blink. Renewable energy, emissions trading, environmentally conscious investing: many of the most exciting advances in environmental thinking are happening in the private sector'.
Toyota's history goes back to 1897, when Sakichi Toyoda (Sakichi) diversified into the textile machinery business from his traditional family business of carpentry. He invented a power loom in 1902 and founded the parent organisation of Toyota, the Toyoda Group, in the same year. In 1926, Sakichi invented an automatic loom that stopped operating when a thread broke.
This prevented the manufacture of imperfect cloth. (Calling attention to problems and rectifying them at the earliest later became an important part of the Toyota Production System (TPS)). The same year, Sakichi formed the Toyoda Automatic Loom Works (TALW) to manufacture automatic looms.
Sakichi's son Kiichiro, an engineer from Tokyo University, was more interested in automobiles and engines than the family's textile business. In 1929, he traveled to the US and Europe to study the manufacturing processes in car factories there. After returning to Japan, he spent his time studying car engines and experimenting with better ways to manufacture them.
In the early 1930s, Kiichiro convinced his father to launch an automobile business and in 1933, Sakichi established an automobile department within
TALW.The first passenger car prototype was developed in 1935. In 1936, Saki-chi sold the patent rights of his automatic loom to a company in England to raise money to set up a new automobile business.
Ferdinand Porsche manufactured the first hybrid-electric car in 1898. In the 1960s, a few attempts were made to manufacture hybrid cars by applying turbine engines to the production of the vehicles. A turbine-powered race car was introduced in 1967, with the turbine engines powering the wheels through a mechanical transmission.
The need for cleaner and more efficient vehicles led to the development of hybrid vehicles in the 1970s. In 1970, a program called the Federal Clean Car Incentive (FCCI) was started by the US government. This program led to the development of a hybrid prototype in 1972.
The program was scrapped in 1976 by the Environmental Protection Agency (EPA) of the US. In 1993, another program called the Partnership for a New Generation of Vehicles (PNGV) was launched in the US. The partners in the program - Chrysler, Ford, GM, and a few governmental agencies - developed hybrid prototypes but never commercialised them.
Knowledge Management at Toyota
According to analysts, Toyota's success in both the local and global markets was based on its gaining a competitive advantage through implementation of innovative and path-breaking ideas on its production floors. Toyota had focussed on learning from the very beginning.
At Toyota, knowledge sharing was intertwined with its people-based enterprise culture, referred to as the Toyota Way. The five key principles that summed up the Toyota Way were: Challenge, Kaizen (improvement), Genchi Genbutsu (go and see), Respect, and Teamwork.
The Toyota Way recognised employees as the company's strength and attached great importance to developing human abilities through training, coaching and mentoring.The principles of'Respect for People'and'Continuous Improvement' were at the core of the Toyota Way. Most experts agree that the TPS system at Toyota worked by combining its explicit, implicit, and tacit knowledge.
The Original Prius
The original Prius was powered by the THS. The THS was an advanced version of the EMS. THS is a power train that combined an internal combustion engine and an electric motor. It was based on the series/parallei hybrid system. It contained a power split mechanism that divided and sent power through two passages.
The First Generation Prius
In 2000, Toyota introduced its first generation model of the Prius in the US, Europe, and other markets. This model was also called Prius NHW11 or Prius
Classic. A few modifications were made to the vehicle to meet vehicle standards for California, USA. Modifications were made to the engine by increasing the horsepower from 58 to 72.
Marketing the First Generation Prius in the US
For Toyota, marketing the first generation Prius in the US was a challenge. Commenting on the launch of Prius in the US market, Senior Vice President and General Manager of Toyota Motor Sales, Don Edmond (Edmond) said,'Frankly, it was one of the biggest crapshoots I've ever been involved in. Not because we lacked confidence in the quality of the product, or the logic of the concept, or the significance of this breakthrough technology.The challenge was to convince U.S. consumers that hybrid technology was more than a science project'.
The Second Generation Prius
Toyota began evaluating the popularity of its first generation Prius in the market soon after it was launched. The evaluation was based on the price, performance, and social aspects of the product as seen by buyers and potential customers.
The most important feature of the new Prius was its enhanced safety.The company had worked towards child safety, reducing the impact of collisions to a remarkable degree.
Toyota expected higher demand for the new Prius than the earlier versions. Edmond said, 'We are targeting a sales volume of 36,000 for the first full year.That's three times our sales target for Prius (original) when it launched in the U.S.'.
Sources: (1) Annual Report, 1998, www.toyota.co.jp (2) Yuri Kageyama,"Toyota Unveils Beefed-Up Hybrid," www.cbsnews.com, April 17, 2003. (3) Automotive Engineering International is a magazine published by the Society of Automotive Engineers. The magazine contains latest information about the technology, and the products manufactured. (4) Grist.org (Grist Magazine) was an online magazine providing environmental news. Grist was a nonprofit organisation established in 1999 and headquartered in Seattle, Washington. (5) Chip Giller,"The Environment's New Bling," www.boston. com, April 21,2005. www.icmrindia.org/casestudies/catalogue/Marketing/Toyota%20Prius.htm
1. As shown in the case study, Toyota Motor Corporation (Toyota) of Japan launched its hybrid vehicle Prius in the Japanese market in December 1997. One of the first mass-produced hybrid vehicles in the world, this product was a huge global success and contributed to Toyota's recognition on the global stage. Based on the facts in Box 1:
a. Identify and discuss the strategic marketing initiatives in the operational modus of Toyota Motor Corporation (Toyota) of Japan.
b. Identify and discuss the innovation based features of the operational modus described in Box 1.
c. Identify and discuss the market penetration (internationalisation) approach and its effectiveness to the competitiveness of Toyota Motor Corporation (TMC).
d. Discuss how the combination of the steps in questions (a, b, and c) enables the economic growth impact of TMC (Toyota) of Japan.
2. As shown in the case study,TMC (Toyota) of Japan began as a family carpentry business and passed through several forms of diversification and transformation. Based on the facts in Box 2:
a. Discuss the term entrepreneurial drive and explain the entrepreneurial drive influence on the diversification and transformation reflected in Box 2.
b. Discuss the process to internationalisation that SMEs may pass through.
c. Identify and discuss the strategic processes used by TMC (Toyota) of Japan.
d. Identify and discuss the innovation features reflected in Box 2.
e. Pinpoint the learning and knowledge management steps taken and discuss how learning and knowledge management culture aid the growth of SMEs and economic growth contribution.
3. As shown in the case study,TMC (Toyota) of Japan faced a challenge in marketing the First Generation Prius in the US: Based on the facts in Box 3:
a. Pinpoint the core features of this challenge.
b. Identify and discuss the strategic marketing and innovation steps taken to effectively address this challenge.
c. Discuss how the steps taken in b would enable Toyota' economic growth contribution.
LET’S REASON TOGETHER
Daniel Platt Limited: a case study in engineering entrepreneurship
William Wilkes, Roof Tile Technical Manager at Daniel Platt Limited and an experienced brick layer and roofer, recognised the problem precisely.'Builders using clay roof tiles often find that they cannot get the roof tiles they need when they need them, especially when working on the valley area of a roof where two pitches meet.' During 170 years of manufacturing natural clay floor tiles, Daniel Platt had to adapt to market needs in an entrepreneurial way on many occasions, and this problem for builders presented an opportunity to create new customers.
Delving into the niche market for clay roof tiles was one such entrepreneurial response when the wider market for ceramic products became increasingly competitive. Having made the move, maintaining a strong, distinct position in the selected niche was vital in order to maximise the value of the opportunity. The introduction of a flexible product design would enable the right products to be available ex-stock.
Routinely, builders might have to wait for up to eight weeks because a particular specification to fit the pitch of the roof they were working on was not available. The implications in terms of time lost and negative cash flow are significant, as Jobs cannot be completed within contractual terms. Producing only one type of fitting Instead of three would reduce stock levels and improve product availability resulting In more satisfied customers and increases in sale revenue.
The Engineering Issue
Roofs are constructed with different levels of pitch (slope), most commonly 40, 45, and 50 degree pitches, each one requiring a different'fitting'which is in fact the term used to describe the angle between the two wings of a valley tile. The task was to design a single tile that would fit all three angles. 'It was relatively easy to get it right for two angles but all three required more consideration to ensure the aesthetics and the functionality of the tile were right', William Wilkes explained.
The process began with a cardboard template, progressed to a metal angled support plate, and then to a piece of extruded clay placed on the support plate and cut to required shape. Different angles were tried and tested on a metal frame roof construction fitted with boards and tile laths and located within Daniel Platt's manufacturing facility. The selected best fits were then fired and placed on to the test roof. It was a long and meticulous design engineering process. As the valley tiles do not feature the 'nibs' that hold regular roof tiles on the laths, precision engineering was essential as the valley tiles at every angle must be supported by the regular tiles.
Innovative Actions Support
Daniel Platt's capacity to exploit the opportunity was considerably enhanced by the support of the Innovative Actions Programme, West Midlands.This regional development agent provided a mechanism for encouraging companies to think differently and for making innovation 'real'and effective. Daniel Platt's entrepreneurial skills and engineering capability were boosted and a product that may have otherwise never reached the market was successfully created. The team provided David Platt with funding to support the research and product development processes, including a coaching and mentoring service.
The universal valley tiles are currently on test with the building trade, and positive feedback is already being received. Sales of roof tiles are now providing customers for one third of the company's total output.
4. mini-case-studies - case studies entrepreneurship
Accessed on 30 May, 2019,from: www.coursehero.com/file/13024027/4-mini-case-studies/
Using an innovative approach, this company has been able to effectively respond to the challenge faced by the company. Identify the nature of innovation in this case and explain the proactive steps taken towards staying competitive.
TECHNOLOGY, SMES, AND THE 21ST CENTURY
Entrepreneurship, and indeed SMEs, are gaining increasing importance as a vehicle for job creation and economic growth. For economies to adapt effectively and achieve the aforementioned dual outcomes, SMEs are increasingly embracing innovative strategies.'Innovation and entrepreneurship power economic growth'(Florida et al., 2017, p. 87). Entrepreneurial innovation enables SMEs to creatively respond to market challenges. In the 21st century where technologies are evolving tremendously and massively impacting how we live and organise our activities, SMEs must respond to, and leverage, this evolvement. On the one hand, due to information and communication technology, customers are not only able to stay connected with other consumers globally but also access the global market, a development that increases the competition challenge that business faces. On the other hand, SMEs can leverage the technology advancement to enable them respond effectively to market stimuli. In other words, SMEs must embrace suitable strategic marketing approach to compete effectively. Doing that requires that SMEs enforce innovative approaches in their entrepreneurial activity. SMEs can leverage technology to implement product strategy innovation through (1) innovative product offering with unique features that appeal to the interest of existing customers, (2) innovative product offerings that serves emerging markets, (3) innovative product offerings leading to new products in the existing market, and (4) innovative and high value added products that serve the global market. Also, SMEs can leverage technology to implement marketing strategy innovation that embraces new and effective ways of creating awareness, promoting and distributing of products or services to customers beyond the geographical domain where the SME is located. SMEs can adopt two options in that regard: (1) technology enhanced marketing and (2) resource pooling marketing.
- 1. What entrepreneurial steps can SMEs take towards effectively fulfilling their role as economic growth drivers?
- 2. How does technology impact entrepreneurial activity of SMEs?
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