A STUDY OF MARKETING STRATEGIES OF SELECTED TINY AND SMALL SCALE BAKERIES OF KOLKATA ABSTRACT OF THE THESIS SUBMITTED FOR THE AWARD OF THE DEGREE OF DOCTORATE IN BUSINESS ADMINISTRATION BY Atish Kumar Chattopadhyay Under the Guidanc* of Prof. Kaleem Mohammed Khu Dr. Anup Choadhnri Dean b Chairman Assaciate Dean Department of Business Administration The ICFAI Business School Faculty of Management Studies & Research The ICFAI University Atigarh MusDm University, Aligarh (iruiia) Kolkata (India) (Internal Advisor) (External Advisor) DEPARTMENT OF BUSINESS ADMINISTRATION FACULTY OF MANAGEMENT STUDIES AND RESEARCH ALIGARH MUSLIM UNIVERSITY ALIGARH (INOIA) ^ 2005 ^yg^ Ai-' lit / li ' 1. Introduction In recent years there have been signs of substantial research interest in marketing practices of small and medium enterprises (SMEs) (Gillmore et. al, 2001; Blankson and Stokes, 2002; Hill, 2001; Siu, 2000; Siu et. al, 2004; Morrison, 2003; Lee et. al, 2001). Most of these studies have indicated the role of marketing to be critical in the sustainability of the small firms. In a recent study (Huang and Brown, 1999), the problems of sales and marketing were reported as important by 40 percent of the firms surveyed while other important factors reported were human resources (15 percent), general management (14 percent) and production / operations (9 percent) \ In India, a survey by the All India Management Association pointed out that among 872 SSI (Small Scale Industry) units in manufacturing, growth fell by 8.1 percent in 1998-2002. One of the main reasons cited by the units for not being able to do well was problems related to marketing (70 percent) (Jain, 2003). Several studies conducted earlier focus on marketing practices of the SMEs with the following findings: SMEs cannot do conventional marketing because of the limitations of resources which are inherent to all SMEs. SME owner/managers behave and think differently from conventional marketing decision-making practices in large companies (Gillmore et. al, 2001). Marketing practices within the small business sector identified three key strategies employed by owner-managers - management /staff relationship, profitability and changing markets (Blankson and Stokes, 2002) . Another study revealed the patchy application of an adapted market orientation framework. Interestingly enough, it also indicated "informal" marketing deliberations taking place and that marketing in the small business sector seemed to be an informal and unplanned activity that relies on the intuition and energy of the owner-manager (Blankson and Omar, 2002). A study conducted in 1999 revealed that sales orientation of SMEs is what determines their marketing character"*. In the study, marketing practice and decisions were also characterized by significant usage of personal contact networks. The marketing ' The study was conducted in the Austrahan context. ^ Marketing practices within the UK small businesses were studied The study assessed the marketing practices among African and Caribbean small businesses in London " 57 SMEs in Ireland and UK were studied to identify key determinants of SME marketing activities decisions were ostensibly operational in character, became strategic and eventually effected strategic change in the marketing practices of SMEs (Hill, 2001). Kwaku (1997), observed that SMEs are unique and that scaled down large business models may not be suitable for them India being an Asian developing nation like China, whose marketing practices of small firms has been experienced to be somewhat different from those in developed countries like UK (Siu, 2000). According to Siu (2000), British small firms are customer driven compared to Chinese small firms, which perceive marketing as sales function and an order getting activity. Some of the high performing small firms, as experienced by Siu, place marketing in a leading position of corporate plaiming, set aggressive marketing objectives and undertake some in-house researches to collect information. On the contrary, European small firms have a higher level of awareness and degree of using situation analysis. In the recent researches of Siu et al, it was observed that higher performing Taiwanese SMEs were still sales oriented and made less use of strategic plarming tools although they were quite aware of those tools (Siu et. al, 2004). Kirby and Siu (1998) provided a critical review of researchers into the role and processes of marketing in small firms and attempted to classify the earlier studies. They identified four approaches, namely the stages/growth model; the management styles model; the marketing as a management function model and contingency model. They observed that too much attention has been paid to the limitations and constraints of small businesses, but importance of marketing discipline was neglected. Romano and Ratnatunga (1995) explored the role of marketing in the development of small enterprise research (SER) through examination of 42 marketing related studies of small firm settings. They identified and discussed three major research thrusts from the literature as - marketing as a culture, marketing as a strategy, marketing as tactics. They suggested that further research was required to extend the database. The current research addresses the issue of studying the marketing strategies adopted by a group of small firms in the city of Kolkata, India. 2. Statement of the problem One of the measures of the pohcy support for promoting small businesses in India was the policy of "reservation"^. However, the policy environment for Indian industry in the 1990s underwent an array of changes with the broad-based domestic economic reforms launched in 1991, leading to a series of reforms in industrial and trade policies. The Indian Government decided to introduce de-reservation of small scale industries (SSIs) in a phased manner since 1997. As a result of de-reservation, significant inflows of large organizations were expected in all these sectors, leading to increased competition. As mentioned earlier, studies conducted amongst SSIs post de-reservation in India indicated that the problems related to marketing was one of the main reasons for the units not doing well (70 percent) (Jain, 2003). The third census on small scale industries (SSIs) in India also identified marketing problems as causes of exit and sickness in 36 percent of the cases (Business World, 2005). For the existing small and tiny businesses appropriate marketing strategies may hence be the critical success factor. It is, therefore, necessary to study the existing marketing strategies of these firms. The bakery sector was chosen for t^ purpose of the study, as it was earlier reserved for the SSIs. 3. Research Objectives The study attempts to assess the marketing strategies of some selected tiny and small scale bakery firms in the city of Kolkata and evaluate them using the frame of reference of the existing market of the city. The broad objectives of the study are mentioned below; Reservation of products for exclusive manufacture in tiie SSI Sector has been one of the important policy measures for promoting this sector. This policy was initiated in 1967 with 47 items which was enlarged to 807 items in 1978. ("http://exim.indiamart.com/ssi-policies/policv-reservation.html - 30.09.2003) 3.1 To understand' the buyer characteristics of the small and tiny bakery firms of Kolkata, with respect to brand preference, reason for choice, type of purchase etc. 3.2 To study the present marketing mix of the small and tiny bakery firms of Kolkata. 3.3 The basis of segmentation for the buyers of the small and tiny bakeries of Kolkata. 3.4 To assess the perception of the brands as perceived by their target customers with respect to the small and tiny bakeries of Kolkata. 3.5 To notionally interpret the appropriateness of the marketing strategies for the small and tiny bakery firms of Kolkata. 3.6 To assess the impact of appropriateness of marketing strategies on the performance of the firms. 3.7 To remark on the effectiveness of the present marketing mix of the firms in the light of their performance. 4. Conceptual Framework for studying Marketing Strategies The conceptual framework for the study is derived from the theories and previous researches. Marketing researchers have broadly argued "marketing strategy" to be a concept built on robust platform of STP - Segmentation, Targeting and Positioning (Kotler, 2005; Terrell et. al, 2002; Walker et. al, 2001; Perreault and McCarthy, 2002). It has been suggested that marketing strategy requires decisions about the specific customers that the firm aims to target and marketing mix the firm may develop to appeal to that target market by positioning it suitably in a superior way (Kotler, 2005). In this context, the study of the effectiveness of the marketing tools is essential for an appropriate marketing strategy. The appropriateness of the marketing strategy may be judged by assessing the difference between the customer's perception of the market and the firm's market offering (Perreault and McCarthy, 2002; Cravens, 1997). Marketing mix may be viewed as the basic input of marketing strategy, since it is the mixture of elements useful in pursuing a certain market response. Also, marketing strategy was considered as any feasible combination of decisions relating to the components of the marketing mix (Cook, 1983). One may argue that, in spite of many advances in marketing thoughts and conceptualization, including broadening of marketing concept (1970s), emphasis on the exchange transaction (1980s), and most recently, the development of Relationship Marketing and Total Quality Management (1990s), McCarthy's core concept has remained quite robust (Yudelson, 1999). Waterschoot and Bulte (1992) evaluated the 4P classification based on the criteria proposed by Hunt (1983) and proposed an improved classification broadening the concept of promotion into communication mix and promotion mix. Appropriateness of marketing strategies may be viewed as the congruence of market offerings of a set of products and services and its corresponding consumer perception amongst its target segment. More the target segment is able to understand and believe the cues (Richardson et.