The Effect of Small Firms on the UK Economy and Governmental Policy – Research Paper

The Effect of Small Firms on the UK Economy and Governmental Policy – Research Paper
BACKGROUND – Prime Minister Tony Blair has recently unveiled a £50m fund to back budding entrepreneurs claiming that the UK ‘needs to embrace entrepreneurs in the modern world.’ The Secretary of State for Trade and Industry, Stephen Byers, also announced details of proposals to boost enterprise and innovation in small

businesses. Mr Byers said “Enterprise and innovation are vital to improving Britain’s competitive position in the knowledge driven economy. The proposals set out in the last budget which include tax credits and incentives, indicate that the Government are working towards creating the right framework for businesses to thrive. The overall aim is to provide a stable environment and appropriate incentives for a vibrant enterprise culture.”

My dissertation will be based on small business marketing, as I work for a small business in the service sector and information is readily available. Areas of my studies which focus on Small and Medium Enterprises (SME’s) have become of great interest to me, especially as 55% of the UK workforce work for SME’s and 92% of new jobs created are for small firms. There are 3.6million SME’s, which employ less than one hundred people, in the UK. These firms play an increasingly important role in the success of the economy and government policies are currently being adapted to encourage entrepreneurs to become self-employed making this subject topical at the moment. I have been asked to carry out this project by the owner of Wiring Services, a local electrical contracting partnership currently employing ten people. The owner has no formal business qualifications and is striving to expand the business.


I propose to study the following research question:

A case study into Wiring Services, a local small business, and its marketing activities.

The aims of this dissertation are to examine the current marketing strategy of Wiring Services, a typical local small enterprise. A critical appraisal of existing systems, processes and procedures will be carried out and recommendations offered to the owners with particular reference to how marketing can be used to drive the business forward in terms of growth.

The Research Objectives:

• To examine the current marketing strategy of Wiring Services.
• To discover what motivated the owner to become self-employed and set up his own small business and what aims the owners are working towards for the business.
• To critically appraise existing marketing systems, processes and procedures currently in place to achieve the firm’s overall marketing strategy.
• To discuss the importance that maintaining customer satisfaction has in the contracting industry.
• To make recommendations after establishing how marketing can be used to help improve Wiring Services’ performance and to aid growth and development.

This is a piece of applied research as it is ‘…of direct and immediate relevance to managers’ (Saunders (1997)). The small business owner will find the research useful and the management of Wiring Services will act upon its findings. This research has elements of both exploratory and descriptive studies as the study will be explore small business marketing to clarify the nature of the issue faced by Wiring Services. The critical review will be descriptive


Marketing is an important function for both small and large firms. In the ever-changing and increasingly competitive marketplace, firm’s that identify unfulfilled needs and wants of target markets and deliver the desired satisfactions more effectively and efficiently than its competitors will more than likely become the successful market leader.

In 1991, 96 per cent of firms in the UK employed less than twenty people and these firms accounted for around one third of non-government employment. During the 1980’s there was a significant rise in the number of self-employed people in the UK. It has been argued people are more likely to become self-employed as they find it harder to find work (Mayes and Moir, 1990). Therefore perhaps the growth of small businesses may have more to do with the labour market than an increase in entrepreneurial flair.

Research into marketing in small businesses has concluded that it is frequently under-utilised and misunderstood by small business owners/managers. Carson’s study (1990) into small firms in Belfast, discovered that the marketing function is often seen as peripheral to small firm’s requirements. Many small firms, including Wiring Services, manage to achieve high turnover and profit without any formal marketing plans or systems which maybe why the small business owner often questions the importance of marketing unless there is a need for growth or expansion within the firm.

However, on the other hand, conflicting information was given by Beam and Carey (1989) which suggested that small businesses are very aware of the need for marketing even if they do not always engage in its activities. The vast majority of marketing literature deals with the application of marketing and marketing planning in terms of the larger firm. Hogarth-Scott et al (1996) state that complex marketing theories and sophisticated formal processes are inappropriate to the small firm as they wouldn’t help the owners understand the markets in which they operate and the owners wouldn’t have the time or patience to digest or implement them. In small firms the owner has to be a generalist and is often involved in every decision from everyday issues such as customer enquiries and financial control to matters which arise less often such as employee recruitment. It is therefore wrong to suggest that they should become marketing specialists (Stanworth and Gray, 1991). Booksbank (1999) developed a four-phase marketing planning model to illustrate how the key marketing principles can be applied to the smaller business.

SME’s must utilise the advantages they have over their larger competitors rather than dwelling on the fact that they aren’t able to gain from the same economies of scale and have severe resource constraints. SME’s are often far better at offering a friendly service as they are closer to and can talk to the customer, which is a vital source of competitive advantage (Hogarth-Scott et al 1996). As businesses move through the product life cycle stages towards growth, the need for strategic marketing planning and marketing information increases. The costs of such processes should be weighed against the increases risk and uncertainty which will result is marketing is ignored (Kenny and Dyson, 1989).

This brief review of the limited amount of past research into small business marketing available suggests that marketing is important to small business owners and could help to expand firms and make SME’s more successful in the increasingly turbulent and more competitive marketplace. Success is dependant on a strong customer focus (Hogarth-Scott, 1996), therefore small business owners would be expected to understand the need for marketing strategies.


A case study approach will be adopted in which I will look at a local small enterprise in great detail. Robson (1993) defines case study as’ ‘the development of detailed, intensive knowledge about a “case”.’ The case study technique has been recommended as a useful strategy if the aim is to, ‘gain a rich understanding of the context of the research and the processes being enacted (Morris and Wood, 1991). This is particularly relevant as one of the objectives of this research study is to appraise existing marketing processes and this can only be executed successfully with a thorough understanding of the small-business marketing topic.

Saunders et al (1997) suggest that the case study technique is an extremely worthwhile way of exploring existing theory. Robson (1993) states that the case study approach has considerable ability to generate answers to the questions, why, what and how. The case study approach will aid the research study as it is necessary to discover, why marketing techniques should be adopted in the small business, what techniques and theories are best adapted to the needs of the small business, and how marketing should be implemented on a day to day basis.

To complete this dissertation, two ways of collecting data will be utilised by conducting both primary and secondary research. Secondary research involves re-analysing data which has been collected by somebody else for another purpose. This data may not be wholly relevant to the research question but will help me gain background knowledge in small business marketing to help meet the aims and objectives of the dissertation.

Secondary data can be either internal or external. Internal secondary data is data produced within the firm for purposes other than marketing decision making (Bellenger and Greenburg 1978). Secondary data, Wiring Services collects to support its day to day operations will be readily available and access to any relevant documents such as financial statements, letters, reports and brochures will not be a problem, as I have worked there a long time and know the owners very well. However when considering validity and reliability, the accuracy of such information must be considered. External secondary data will be collected from academic journals, textbooks, newspapers, Internet sites and perhaps government publications. If the secondary data within the journals are refereed then an academic has already concluded that the data is reliable. The reliability and validity of non-refereed sources must be considering when basing decisions upon them. Sound recommendations can only be made when based upon a wide range of in-depth, reliable knowledge of the subject. Extensive secondary research will give the recommendations made substantial weight.

New primary research will also be conducted as a part of this dissertation. To design an appropriate research strategy that will meet the aims and objectives set out previously, the information needs should first be identified. Information regarding Wiring Service’s current marketing strategies, customer satisfaction levels and the owners’ aspirations for the firm and are examples of the necessary information. The data required to produce this information also needs to be specified. Secondary data sources will be looked at first, as this is typically the least expensive approach and will provide the theoretical and academic underpinning needed to meet the objectives fully. The nature of the objectives however, require primary data to be collected which will complete the gap between the information needs and the secondary data available. There are two ways to obtain primary data, by communication (i.e. interviews) and by observation. Communication can be quicker and more versatile but observation is more objective and accurate. I propose to make use of both to benefit from the advantages of both methods. Case studies usually use a mixed methodology approach and various data collection methods are employed, usually interviews, observation, documentary analysis and questionnaires.

This case study approach is ‘unscientific in nature’ and I have decided to make this study wholly qualitative as quantitative data is numerical, collected in a standardised manner and analysed using diagrams and statistics which isn’t suitable to meet the objectives of this study. Qualitative research is any research acquiring data which is not subject to quantification or quantitative analysis. Qualitative research is unscientific, involves small samples and you cannot generalise from it. However it is arguably cheaper and aids understanding of feelings and motivations. The majority of past research into small business marketing have also been qualitative studies.


An interview is a purposeful discussion between two or more people (Kahn and Cannell, 1957). In an exploratory study such as this, in-depth interviews can be very helpful to, ‘find out what is happening and to seek new insights’ (Robson 1993).

I will interview the SME’s owners to collect vital contextual data regarding the firm’s current stance on marketing and where the firm sees itself going in the future. Such interviews are associated with qualitative research, and considering the nature of the qualitative information required regarding the respondents thoughts and ideas on marketing principles, I believe the interview situation will be appropriate as it is gives you the flexibility to explore the complexity of the topic. Saunders et al (1997) state that the use of interviews, ‘can help you to gather valid and reliable data which are relevant to your research questions and objectives’. Questionnaires would not be appropriate as responses are usually restricted to the options given and additional questions, which crop up as a result of an interesting answer can’t be immediately asked. With in-depth and semi-structured interviews validity is concerned with the extent to which the researcher has gained full access to the knowledge and meanings of informants (Easterby-Smith (1991)). High levels of validity are possible with carefully constructed qualitative interviews and to achieve this I will use informant verification. Written accounts of the transcribed interview findings, which will include my own conclusions, will be presented to the interviewees for them to verify the content. This is a form of triangulation and also may bring up new ideas and interpretations, which didn’t immediately occur to the interviewer. Ethnocentrism will be avoided because if any conclusions are incorrectly assumed from what is said, the interviewee has the opportunity to correct the mistake.

Reliability is concerned with whether similar results would be obtained if different researchers conducted similar research. In this case, whether alternative interviewers would discover similar information. Therefore interviewer, interviewee and response bias should be eliminated as much as possible and this isn’t drawn attention to in the paper. Reliability is a concern of non-standardised research methods such as in-depth interviews. However, the results are not really intended to be repeatable, as they reflect reality at the time they were collected, in a situation which may be subject to change (Marshall and Rossman 1989).

Customers will also be interviewed using a semi-structured technique to ascertain how effectively Wiring Services are meeting the needs of their customers and to take note of any improvements that could be made. Depending upon how many customers take the time to be interviewed, this information may be more efficiently gathered using a focus group or group interview methodology. This will save time and money and also has the benefit of allowing a variety of points of view to be made and the group of around 8-10 people can respond and discuss their views.

As only one SME will be investigated, it is highly questionable whether this sample is representative of the whole population. ‘Generalisations about populations from data collected using any sample are based on probability’ (Saunders (1997)). Therefore, the larger the sample size, the more the results can be generalised from. However generalisation is not usually central to the purpose of qualitative data.


The first phase will consist of an ongoing participant observation process. Participant observation is qualitative where ‘the researcher attempts to participate fully in the activities of subjects and thus become a member of the group or organisation (Saunders 1997). It is used to attempt to get to the root of ‘what’s going on’. Having worked for Wiring Services for 17 months full time whilst on placement and part time for almost two years advantage will be taken of the access to information. Here it will be discovered if the intended marketing strategy of the firm is actually carried though and delivered. A diary will be kept of any useful information relating to the marketing processes the firm adopts and any spoken reference made to the topic. Robson (1993) suggests that data collected in this manner be classed as ‘descriptive observation’ and a ‘narrative account’. The owners will be aware of my research as they commissioned it and have said that they won’t mind me taking notes as and when information arises. This will mean that primary observations will be made and notes taken of events as they happen in a diary.

Saunders 1997, states that with participant observation research, data collection and analysis is part of the same process. The rough diary notes will be written up in a more systematic manner with the emphasis on generating a theory to help understanding of ‘what is going on’.

Qualitative analysis is problematic, as there is no standardised approach to it. All qualitative data will be analysed in order to understand and manage it. Key themes and patterns will be identified for further exploration to allow me to draw conclusions and make recommendations. This will be done by adopting a phenomenological approach which will not involve categorising or coding the qualitative data as the nature of the information gathered is specific to one company and these approaches aren’t relevant. Transcripts and notes from the qualitative interviews and observations will be used and thoroughly read and re-read them making keynotes from them. In order to make full recommendations of how and if marketing can help the firm expand and grow it is important to establish the firms current position in the marketplace. Information gathered from both the interviews and observations will be applied to Porter’s Model of competitive behaviour to establish if the most useful strategy is currently adopted. SWOT and PEST analyses will give an insight into the external environment in which the firm operates and the opportunities and threats posed by external sources.


There is only one deadline for this piece of research, which is the final submission date. In order to manage the time available most efficiently and to avoid stress a gantt chart has been constructed and is contained in appendix 1.


Access to internal information should not be a problem as the owners of Wiring Services fully support this research project. Therefore all observations are overt and no secrecy will be involved. However some of the internal secondary data which I will collect such as financial information may be of a sensitive nature and it is important to keep this information 100% confidential, private and away from individuals who are not permitted to gain such knowledge including other employees. I have already been granted permission to interview the firm’s customers. Throughout the interviews questioning shouldn’t be over-zealous and the situation shouldn’t be stressful for the interviewees. Interviews will be arranged at times suitable to all parties to avoid conflict. The interviewees will be given the right to decline to answer some questions if they prefer.


In terms of a budget for this research study, all elements will be relatively inexpensive with no postage costs. Arranging interviews with customers will be carried out over the telephone and permission has been given to use the phone in the office for this purpose. The major cost may be time from work taken out to conduct interviews and focus groups, this will cost Wiring Services money, however the benefits of the study far outweigh this cost. Travel to customers offices’ will be covered by company expenses in the researchers company car.


According to Johnson (1994), research should be: ‘A focused and systematic enquiry that goes beyond generally available knowledge to acquire specialised and detailed information, providing a basis for analysis and elucidatory comment on the topic of enquiry.’ This can be interpreted to mean that all research, whether applied or academic, should be carefully planned and structured with a clear methodology to provide new information which will enlighten the reader.