Thursday, February 25, 2010

What Are the Success Factors when Working with Large Purchasing Organisations? Lessons from the Ethnic Minority Suppliers

By exploring the prospect of ethnic minority businesses (EMB) ‘breaking out’ from the ethnic enclave, low-value-added markets, recent research has identified entry into the large purchase organisation (LPO) supply chain as a rewarding route (Ram et al., 2007), with potential access enhanced by a growing requirement for public sector LPOs to comply with official directives on diversity through engaging minority suppliers (Ram and Smallbone, 2003). But the entry into, and operating in, mainstream markets by the EMBs is found to be challenging because of a number of reasons. First, these firms lack the required capabilities, resources and managerial skills. Second, they face constrained opportunity structures. Third, they lack prior experience and knowledge of operating in such markets.

Recently, at CREME, we sought to examine what factors enable EMBs to ‘break-out’ and identified a number of success factors that help EMBs to operate in the mainstream market. The empirical work was based on interviews with 18 EMBs drawn from three contrasting sectors: business services, ICT, and food manufacture.

The key insight which emerged from the above study was that EMBs have a great potential to ‘break out’ and enter the mainstream product market, including engaging in supply chain relations with the LPOs, given their resources and knowledge base and availability of the learning opportunities. Moreover, the entry into a specific product market is driven by the combination of owner-managers’ decisions that reflect their perceptions of the product market (Ambrosini et al, 2009) and the nature of product/service offerings which are value-adding or knowledge-intensive. These key insights, in turn, have a number of implications in terms of what factors and capabilities enable the ‘break out'. The study, thus, identified a number of success factors that enable EMBs to work with the LPOs in particular and serve the mainstream market in general. These success factors include:-
  1. EMBs’ ability to identify gaps in customers’ needs and products, service or process problems that they themselves could address in the market place. In other words, EMBs’ business opportunity identification and development capability is crucial. The owner-managers need to develop ability to access external knowledge through business networks and create capability for adapting routines that would enable them to recognise and exploit business opportunities.

  2. EMBs’ ability to develop two levels of resource development and integrating capabilities is crucial. These are: 1) possessing the threshold minimum level of resources stock to enter the intended market and, 2) combining or integrating existing resources with new resources and knowledge. Typical resources and knowledge required to enter a specific product market included financial, informational, human resources, knowledge about technology (ICT), knowledge about market (product market) and accreditations. EMBs also should be able to understand the differentiated impacts of industry accreditations on their tendering and winning of the contracts from the LPOs. For instance, while for firms offering knowledge-intensive ICT, or those subject to auditing and regulation, the employment of accredited staff is often a necessity, this might not be the case for some firms in business services.

  3. Having in place employees with appropriate skills and talents, and those who are able to build and maintain the supply chain relationship, is found to be a key success factor. This entails EMBs to develop a new relationship with the labour market and new ways of deploying and managing employees.

  4. Ability to demonstrate their knowledge to their larger customers through highly-developed firm-specific qualities and bespoke offerings: EMBs’ ability to supply high-value, knowledge-intensive, products and services, and developing strategic service delivery capability are found to be key success factors.

  5. Developing and using networking and bridging capabilities: Network resources have a significant influence on where and how EMBs organise their resources and what new resources and skills they could draw on. Moreover, EMBs with developed ‘bridging’ capability are able to identify product markets in which their products and services get exchanged. Relatedly, relation building with customers and suppliers, and working with strategic partners provide EMBs with a chance to better serve the identified market and help them position themselves in the new market place. Of special importance here is the owner's developed ‘know-who’ competence and his or her social networks beyond a narrow circle of personal family ties. This competence was ably demonstrated by several of our respondents in ICT and Business Services. The above two success factors suggest that EMBs ‘network competence’ enables effectiveness of entrepreneurial capability and signifies the crucial importance of the owner-managers' ‘know-who’ competence to operate in a new product market.

  6. Learning about collaborative approaches of larger customers and adopting and integrating them into their relationship management approaches are key developmental issues for many of the EMBs.
 
The process of developing and use of a combination of the above success factors by the EMBs, however, could be recursively fluid, emergent and challenging for number of reasons. First, EMBs tend to develop narrow core capabilities to aid their specialization under intensive competitive situations (Crick and Jones, 2000). Second, the return from their investment in developing an array of capability might be uncertain (Chen and Chen, 2002). Third, transaction-based supply relations with the LPOs is one of the constraints for developing partnership-based relationship that enables learning. However, this said, EMBs would benefit from using the combination of the above mentioned success factors as they fit to their organisational context when engaging in a supply chain relationship with the LPOs and serving the mainstream market.


- Kassa


References:

Ambrosini, V., Bowman, C. & Collier, N. (2009) ‘Dynamic capabilities: an exploration of how firms renew their resource base’, British Journal of Management, 20 (Special Issue): S9- S24.

Chen, H., & Chen, T. -J. (2002) ‘Asymmetric strategic alliances: A network view’, Journal of Business Research, 55(12): 1007−13.

Crick, D., & Jones, M. (2000). Small high-technology firms and international high-technology markets. Journal of International Marketing, 8(2): 63−85.

Ram, M., Jones, T., & Patton, D. (2007) ‘Ethnic managerialism and its discontents: policy implementation and Ethnic minority businesses’, Policy Studies, 27(4): 295 – 309.

Ram, M. and Smallbone, D. 2003 ‘Supplier Diversity Initiatives and the Diversification of Ethnic Minority Businesses in the UK’, Policy Studies, 24 (4):187-204

Friday, February 12, 2010

New Migrant Communities: Polish Entrepreneurs in Leicester

In autumn 2006, the BBC highlighted a large increase in the number of Polish immigrants coming to the United Kingdom. This finding is mirrored by anecdotal evidence and personal observation in Leicester and the Midlands; an area that is often associated with immigration. Unlike other ethnic minorities, the demographics of the Polish immigrants, in particular the size, age and gender composition, as well as the skill level and educational background, are subject to much speculation. This inevitably also affects our understanding of the professional activities of those people. Although a variety of shops have been opened by Polish immigrants, indicating their entrepreneurial activities, our understanding of these businesses and with it their potential impact, was underdeveloped, if not to say nonexistent. The proposed study aimed to gain a first insight into Polish businesses and business aspirations in Leicester and the Midlands, thus providing first answers and, perhaps more importantly, a route map able to inform future research.

In 2006, CREME sponsored the research into a qualitative assessment of Polish businesses in Leicester with the objective to examine the skills, aspirations and potential of Polish nationals towards entrepreneurship; investigate their business experiences in Leicester; assess barriers to business development and identify business support needs for those ethnic-owned firms.

To meet the aim and objectives, a two-phase approach was used:
  • Initialising the project was the assessment of the scale of Polish entrepreneurial activity in Leicester and the Midlands. Starting with communal focus points like Polish shops, bars or restaurants, interviews were used to identify and map Polish business in Leicester.
  • In a second phase the team selected a group of 10 Polish companies, representative of the Polish business community in Leicester and the Midlands. Interviews were conducted with the respective proprietors in early 2007.

Dr. Natalia Vershinina and Dr. Michael Meyer devised semi-structured questionnaires based on forms of capital framework (Bourdieu, 1986). This built on the work that was already carried out by Prof. Monder Ram and Dr. Nick Theodorakopoulos on the state of Somali enterprise in Leicester. The interviews were carried out using narrative approaches in the form of the life-story and immigration history with this select group. The interviews were recorded, typed, and analysed with the help of NVivo qualitative software.

Portraying the Polish immigrant society has raised awareness for particular needs of this group, as well as their contribution to Leicester. Filling this picture in with facts, rather than relying on speculation, helped to fence off the real impact these people have on communities in which they operate. Moreover, we can clearly see the ways in which forms of capital are used by different Polish nationals to create different entrepreneurial activities and that these are time bounded and relate to the period of their entry into the UK. This study is limited by the sample size as well as the selection process. This did reflect the lack of information available on Polish immigrant entrepreneurs within this geographically bounded area. Despite this, the findings suggest that ‘super-diversity’ needs to be acknowledged – as ethnic communities are not homogeneous and this needs to be addressed by research and policy. Moreover, the diversity within ethnic communities is a changing phenomena and this affects the means and modes of capital available: the value of capital changes with use, while forms can increase or decay with storage, therefore that what can be used at one point in time may not be available or valuable at another. Conveying the key characteristics of Polish businesses, especially barriers they encounter, to governmental bodies may contribute to an informed integration of these people, as well as help to actively improve the areas business conductivity.


For more information on the research project please contact the corresponding author:
Dr. Natalia Vershinina on nvershinina@dmu.ac.uk


To date the study resulted in an Occasional Paper, two conference papers and a journal paper currently under review:

Vershinina, N., Barrett, R., Meyer, M. “Polish Immigrants in Leicester: Forms of Capital Underpinning Entrepreneurial Activity”, under review in Work, Employment and Society.

Vershinina, N., Barrett, R., Meyer, M. (2009) “Polish Immigrants in Leicester: Forms of Capital Underpinning Entrepreneurial Activity”, Leicester Business School Occasional Paper Series, N86 (August), ISBN: 978-1-85721-401-7 9 [PDF link]

Vershinina, N., Barrett, R., Meyer, M. (2009) “'Researching Immigrant Entrepreneurial Development: An Ethnographic Study of Polish Entrepreneurs in Leicester”, EIASM RENT XXIII - Research in Entrepreneurship and Small Business Conference, Budapest, Hungary (19-20 November 2009)

Vershinina, N. and Meyer, M. ( 2008) “Polish Entrepreneurs and Social Capital” , International Entrepreneurship - promoting excellence in education, research & practice, 31st International Small Business Conference, Belfast, Northern Ireland