Market Vulnerability and the Design and Management of the Marketing Function in Small Firms

Abstract

ABSTRACT: VULNERABILITE DU MARCHE ET ROLE DES STRATEGIES COMMERCIALES DANS LES PETITES ENTREPRISES Cet article examine, a partir d'un echantillon de 38 petites et moyennes entreprises de technologie, les rapports existant entre le niveau de dependance d'une firme it l'egard de ses pricnipaus clients, des marches et produits, et le succes de ses strategies de marketing. Les resultats montrent que les firmes les plus independantes, mettent moins l'accent sur les aspects technologiques du marketing, rapportent des scores plus eleves sur le marche et rencontrent un plus grand succes avec leur systeme de marketing que leurs contre-parties plus dependantes. Companies go out of business for many reasons, but a frequent one is their failure to achieve a viable market position. Many of these failures enter business with plans to capture only a small part of a market, making do with sales derived from a narrow product line aimed at a few key customers. Other business failures claim they aggressively attacked market segments, vertical markets, and niches, but appear to believe that this statement alone will guarantee success. Companies which depend on one or a few customers, markets, or product lines for their revenues often do so at considerable risk. Although there has been a growing recognition of the dependence issue in the management literature, marketing experts have paid little attention to the management of a firm's vulnerability to its markets and customers, i.e., to the development of action plans and structures for reducing a firm's market-related dependencies. This is surprising, because the success with which a firm manages such dependencies is considered a critical measure of its overall success.' Empirical evidence on the management of marketrelated dependencies is important for small firms, which are more likely than large ones to face hardship in establishing and maintaining market position. The purpose of the exploratory study reported in this article was to examine the relationship between market vulnerabilities and the ways in which small and medium-sized firms manage and structure their marketing activites. More specifically, it compares the management of firms' marketing structures and their performance in situations of low and high vulnerability. Implications for the growth and long-term survival of small firms are discussed. LITERATURE REVIEW Vulnerability refers to the degree to which a firm is dependent on other firms, groups, or individuals. This dependency could involve obtaining resources such as raw materials and labor, or the disposal of the firm's outputs-its products and services. Research in the organization and management areas has shown the impact of the extent of firms' vulnerabilities on their organizational structure and management. In fact, this literature indicates that managing and reducing a firm's vulnerability can enhance its overall performance. For example, firms that are highly vulnerable to their suppliers for acquiring essential raw materials tend, among other things, to increase the specialization of their purchasing departments and to centralize decision making regarding purchasing. On the other hand, firms facing labor scarcity tend to introduce more flexibility into the design and conduct of tasks, They also tend to decentralize decision making regarding work and to provide better pay and work conditions in order to attract and retain their workforces. In the marketing literature this issue is less well researched. However, ElAnsary and Stern, in addressing the issue of channel management, have shown that the more a firm's goals can be affected by another firm, and the fewer the alternatives open to it, the more vulnerable the firm is to its suppliers or competitors. That is, vulnerability is inversely related to a firm's power; the more vulnerable a firm, the less power it can exercise within its relationships with other firms. …

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