Managing Small Business - Rayz - Case Study Example

Managing Small Business BY YOU YOUR SCHOOL INFO HERE HERE CONTENTS AN INTRODUCTION TO SMALL BUSINESS AN EXPLORATION OF THE MANAGEMENT OF RAYZ FOUNDER-SPECIFIC ATTRIBUTES LEADING TO SUCCESS CHALLENGES AND DISPARITY FROM THEORY AT RAYZ CONCLUSION REFERENCES APPENDIX: A PERSONAL REFLECTION AN INTRODUCTION TO SMALL BUSINESS Small businesses are vital to developed and developing nations and are usually owned by private owners that support between 15 and 50 employees as a classification by the European Union with a balance sheet total of less than €10 million (Europa 2015). Small businesses are considered to be the backbone of an industrialised economy. In the United States, small businesses employ approximately 68 million workers which represent roughly 50 percent of all jobs available in the private sector (USBA 2009). Over the last 10 years, small businesses represent between 60 and 80 percent of new job growth in the United States. To illustrate, private sector small businesses contribute $2.1 trillion of the total $4.8 trillion in total private sector payrolls (USBA 2009). In the United Kingdom, small businesses are just as critical to the economy. In the year 2014, the UK maintained 5.1 million small businesses that provided payroll to approximately 12 million workers (Ward and Rhodes 2014). Small businesses in the UK account for 12 percent of export activities and 11 percent of import activities (Ward and Rhodes), making them substantial in supporting growth in the economy and the provision of taxation revenues to the UK government. In fact, it is estimated that approximately £45.4 billion worth of annual tax revenues came directly from small businesses between 2010 and 2011 (Ward and Rhodes). It was once believed that small businesses served a niche market, however growth and success in small businesses now make these companies the core focus of UK economic policy (Mindful Money 2011). This again illustrates the vital importance to the economy of developed nations as these businesses hire approximately half of the entire labour force in the UK. Small businesses promote innovation which impacts multiple sectors of the entire economy and improves the lifestyle of consumers around the world. The small business being focused upon in this research is such a contributor to the Saudi economy. In this research study, exploration of a small business, Rayz, was conducted. Rayz is headquartered in Saudi Arabia and maintains a business model that focuses on excellence in digital marketing and the marketing use of social media (Rayz 2015). Rayz sustains a staff volume of 17 employees and managers that contribute creative ideas for development of marketing content that facilitates positive communications between various brands and consumer segments (Rayz 2015). The goal of the company is to give brands a personality, allowing the firm’s marketer clients to engage with consumers in a direct fashion and promote discourse between both entities (Rayz 2015). Rayz has a very simple strategy: to recruit the most creative people in digital marketing and social media and provide a business forum to allow these employees/managers to flourish in marketing creativeness and quality (Rayz 2015). The business was launched in 2012 by Rayan Alwabil, the current CEO of the business, and Yazeed AlGhuraibi, the firm’s current COO. Being a recent start-up firm, the company is not currently seeking market expansion, but is focused on improving marketing quality in Saudi Arabia and building a network of quality business-to-business relationships with diverse clients in need of domestic digital marketing and improved social media presence. Both Alwabil and AlGhuraibi are so passionate about contemporary marketing strategies and desired to start a business that maintained a unique zeal in digital marketing that positions the company in terms of enthusiasm and marketing obsession unparalleled in the Saudi markets. Growth is a long-term objective, however the owners expect that building a regional brand identity and reputation will be most valuable before exploring a solid growth and expansion strategy. Rayan Alwabil attending the University of Reading in the United Kingdom and holds a Bachelor’s Degree in Marketing and Consumer Behaviour. One of his main passions is photography which is a valuable asset in marketing especially when developing visual promotional content in a variety of digital marketing channels. Yazeed AlGhuraibi also attended the University of Reading in the UK and has direct experience in assisting the multi-national customer, Apple Inc., with the development of an online newsletter that services the Saudi marketplace. This business founder is very fanatical about tech gadgetry and also has an affiliation with photography. All of these skills and obsessions provide the driving force for building a successful, small marketing-centric business model. This research project offers a rich picture of the dynamics and operations of this small business, Rayz, and puts these dynamics into context from the perspective of management at the company. The first approach of the research is to create discourse for how Rayz is managed and coordinated by owners and other support managers. The second approach is to discuss the different life cycle stages of a small business and make correlations to the strategies employed by Rayz. The final approach of the research is to discuss the different challenges that are being faced by this relatively new start-up business and compare these challenges to theoretical perspectives on small business management to determine whether Rayz is following traditional theoretical activity or is innovative in its approaches. The research methodology consisted of a telephone interview with Yazeed AlGhuraibi, the COO of the small business. Mr. AlGhuraibi agreed to openly discuss the business model and its strategic direction, scheduling a 75 minute discussion which occurred on 15 April 2015. Access to this research participant was simplified as the researcher had once worked for Rayz and this co-founder was familiar with the researcher and their competency as an employee of the business. Basic written notes were taken during the interview to record descriptions relevant to small business theory, entrepreneurship and leadership. The qualitative telephone interview was determined to be the most viable method of gaining in-depth knowledge about the business and its strategic direction, as small business theory consistently reinforces that small entrepreneurial ventures must be considerate of social, economic, strategic, and market-related forces. Quantitative methods, such as surveys, simply do not allow for exploration of socio-psychological factors and tend to limit research criteria to a single set of phenomenon. By conducting a telephone interview, using open-ended questions, it allowed the researcher to gain a much broader perspective of all challenges and opportunities in this particular business model. AN EXPLORATION OF THE MANAGEMENT OF RAYZ Rayz is a small business that is highly supportive of promoting entrepreneurial behaviour. This means being flexible, promoting innovation and creativity, working on leadership to build more competent human capital (Kouzes and Posner 2012), being willing to take risks (Hisrich and Peters 2002), and blending cognitive processes with socio-psychological to build a cohesive and dedicated organisational culture (Petkova 2009). Rayz is very prideful about its recruitment strategies that identify the most creative people possible and provide them with an autonomous working environment and shared decision-making that improves motivation and organisational dedication to achieve strategic and client-related goals. Social capital is one of the most fundamental competitive advantages of Rayz according to AlGhuraibi and underpins the firm’s ability to provide excellence in client socio-professional relationships. Peters and Austin (1985) asserts that people are significantly important in providing customers with enhanced value. They are instrumental in providing customer satisfaction which leads to customer loyalty. It has been shown that just a five percent increase in customer loyalty can lead to a substantial 100 percent increase in revenues (Whitely and Hessan 1996). AlGhuraibi is aware of the statistics that most small firms eventually fail. This manager asserts that through people development as a competitive advantage, the firm maintains the ability to gather more clients and the firm therefore focuses on building a positive human resource strategy. Chwolka and Raith (2011) state that a small entrepreneurial venture is likely to fail when managers do not fully comprehend the problems and challenges facing their firms. Ropega (2011) says that entrepreneurial ventures fail because managers often become apathetic and believe that change is not necessary to adapt to their current market environments. This shows why Rayz will likely achieve success. The management team at the small business recognise that the main problem with achieving competitive advantage is providing superior service and creativity to customers seeking digital marketing assistance. By using leadership and HR strategies that promote motivation, shared decision-making and building a culture of inclusion and social belonging, employees service the main mission of excellence in customer service provision. It is unlikely that Rayz will fail as AlGhuraibi asserted that passion and enthusiasm must be ever-present in the business model and staff members collaborate to identify new changes that would better service the client segments that provide important revenues. There is no apathy apparent, in any fashion, in this developing small business. Offered AlGhuraibi, “Arabs are proud of their heritage and have a strong sense of national patriotism” (AlGhuraibi 2015) and therefore a main focus in HR is to ensure that service respects this sense of ethnocentrism that helps attract more word-of-mouth. This founder of the business strongly believes that the majority of client communications strategies must be aligned with strong Saudi values related to national identity. This would again seem to represent that Rayz will likely succeed in maintaining market longevity as the business adopts its business-to-business strategies to meet market conditions and customer expectations. Marketing literature asserts that B2B clients are most concerned with relationship quality, over all other factors, that underpin decisions to select one competitor over others (Temporal 2006). FOUNDER-SPECIFIC ATTRIBUTES LEADING TO SUCCESS From a different perspective, Morrison, et al. (2003) assert that success in small business is determined by the positive skills, personality and character of the manager. AlGhuraibi fully understands what his clients want and utilises his charismatic personality and respectful ideologies of B2B relationships that bring more clients through word-of-mouth without having to spend a great deal in marketing and promotion. Leadership, according to the co-founder, even more than traditional management planning and control, is the most effective method of building a cohesive culture that shares the normative values of Rayz and ensuring revenue growth through intense customer satisfaction. Literature is consistent that leadership failures are a predictor of small business failure (Scheers and Radipere; Beaver 2003; Perry 2001). The desire of AlGhuraibi and other managers, as well as their understanding of how to best implement a quality leadership strategy, would seem to point toward an organisation that understands how to exploit its most sustainable competitive advantage: human capital. When asked about networking, AlGhuraibi asserted that this was a primary management objective designed to help give the firm a better reputation. This is consistent with Carter and Jones-Evans (2007) who assert that networking builds a better corporate image in small business. The company has allowed for travel-related expenditures throughout Saudi Arabia to attend trade shows that spotlight many different companies and even recruit professionals in the field of business and marketing. In fact, AlGhuraibi indicated that he had elected to attend the Women’s Week Expo that occurred in early April 2015, a three day event spotlighting contemporary women’s issues. This strategy was because AlGhuraibi indicated that more women professionals in Saudi businesses were handling B2B relationships with external marketing partners and AlGhuraibi felt this would be an excellent opportunity to network with regional women professionals. Rayz experienced three potential clients desiring to make appointments to consult brand strategy as a result of this three-day opportunity. AlGhuraibi is very extroverted and uses these talents to achieve a greater market reputation. Networking desire and the willingness to devote financial capital toward attending networking events illustrates why Rayz may very well succeed as the business aligns strategy with known and respected theoretical models of networking. The firm states that its values are a Saudi company with Saudi talents (Rayz 2015). By being aware of the micro-economic factors that are driving contemporary business practices, such as women becoming influential in high level business positions, the firm aligns strategy with changing Saudi business practices and social values. This gives Rayz much more likelihood for longevity, rather than failure, because strategies are adaptable to the changing socio-cultural elements of Saudi Arabia and is flexible in changing B2B practices. CHALLENGES AND DISPARITIES FROM THEORY AT RAYZ Where Rayz differs from theoretical perspectives on small business is that AlGhuraibi and his co-founder are monumentally against promoting a family orientation in the firm. It is forbidden, in company policy, for family members to work alongside with creative staff and management. AlGhuraibi believes that co-family environments create conflict, de-motivate and cause social problems throughout the organisational culture. Said AlGhuraibi, “no family member of our staff will ever work here” (AlGhuraibi 2015). When asked to elaborate, the co-founder stated he had experience working with a family-structured small business in the graphic arts industry and output of quality was impacted and it created a clan-like culture that was resistant to new ideas and change. Saudi Arabia is largely collectivist where loyalties are often given to group members and outsiders considered irrelevant (Hofstede 2010). Wagner, et al. (2015) conducted an investigation into 380 different studies on family businesses. It was found in this study that there is a measurable significance in better financial performance than non-family firms (Wagner, et al.). Basco (2014) conducted an empirical study and found that if family-centric firms are able of balancing family matters with business decision-making, the business performs better than non-family companies. This shows the only major deviation from empirical literature about family relevancy and opportunity in small businesses, with Rayz refusing to allow family members to join. This does not mean failure, as Rayz is continuing to grow its client base and revenues under this no family policy. AlGhuraibi was concerned because several staff members have asked the management team to consider recruiting their own family members and were instructed that it would impact productivity and went strictly against policy. It would seem, in terms of Rayz, that actual practice defies the theoretical advantages of family collectiveness and Rayz might serve as a long-term best practice for removing conflict and potential resistance to change by creating no family policies. From yet a different perspective, AlGhuraibi stated that the most significant challenge at the small business was identifying new target markets. The business had utilised several segmentation strategies, including behavioural, geographic and demographic. This had not achieved the type of interest from prospective business clients anticipated. The business is now trying a psychographic segmentation strategy, which is targeting potential clients in terms of their values, lifestyles, expectations and socio-psychological characteristics (Boone and Kurtz 2007). Why is this important? AlGhuraibi found that more business managers were using social media for business purposes and personal purposes which allowed for better communications and discourse between brands and customer attitudes. He changed the direct marketing strategy that did not return results based on geographics and, instead, now has a real-time presence on many social media sites to create dialogue with disparate business leaders. By showing flexibility and adaptability by changing segmentation and targeting strategies, it shows how Rayz is able to change with market characteristics. This is fundamental for an entrepreneurial small business owner. Hayton (2005) states that a successful entrepreneur establishes a vision and then champions this vision by gaining support from customers and internal followers. Rather than focusing just internally, the team at Rayz creates creative content aligned with new target segment attitudes and inspires a vision that all potential and existing customers are co-owners of the business. Allowing them to be interactive in changes happening in the Rayz model promotes a socio-psychological response and builds trust in this small business. This shows innovation in marketing on behalf of AlGhuraibi which is fundamental for a successful small business to achieve success. Changing from demographic to psychographic marketing has brought the firm more scheduled consultations for potential representation of prospective clients’ digital brands. CONCLUSION As shown by the research, Rayz maintains many characteristics of entrepreneurship and strategic direction that is supported by small business literature highlighting best practices that ensure firm success. AlGhuraibi is adaptable to changing market conditions, emphasises strong leadership, seeks opportunities to network for brand reputation improvement, maintains a service philosophy aligned with Saudi values and expectations, and works to create a motivating environment that allows staff members and managers to gain a sense of belonging and express their creativity openly. All of these fundamental factors, as aligned with appropriate theory on small business, predict that Rayz will not be a statistical failure, but instead a monumental market success. The interview did not provide additional time to explore other concepts, only those that were held strongly by AlGhuraibi on what drives management, leadership and being a market-centric firm. In most instances, other than defying family members from working alongside staff members, Rayz is a model of applying respected theory with practice in a way that is bringing this small firm more word-of-mouth, higher revenues, higher internal productivity, and better overall performance. The firm is now geared toward a potential growth strategy, however improving the client base through flexible entrepreneurial behaviour is necessary before delving into potential growth strategies. For now, the firm is developing and testing its competencies and promoting continuous change in order to achieve desired goals and objectives. . REFERENCES Alghuraibi, Y. (2015). Rayz Small Business Interview. 2015. Telephone. Beaver, G. (2003). Small business: success and failure, Strategic Change, 12(3), pp.115-122. Boone, L. and Kurtz, D. (2007). Contemporary marketing, 12th edn. UK: Thompson South Western. Carter, S. and Jones-Evans, D. (2007). Enterprise and small business: principles, practice and policy, 3rd edn. Harlow: Pearson Education. Chwolka, A., and Raith, M. G. (2011). The value of a business plan before start-up – A decision theoretical perspective, Journal of Business Venturing, (2011), pp.1-15. Europa. (2015). What is an SME? [online] Available at: http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm (accessed 15 April 2015). Hayton, J.C. (2005). Promoting corporate entrepreneurship through human resource management practices: a review of empirical research, Human Resource Management Review, 15, pp.21-41. Hisrich, R.D. & M.P. Peters (2002). Entrepreneurship. New York: McGraw-Hill Irwin. Hofstede, G., Hofstede, G.J. and Minkov, M. (2010). Cultures and organizations: software of the mind, 3rd edn. McGraw Hill. Kouzes, J.M. and Posner, B.Z. (2012). The Leadership Challenge, 5th edn. Jossey Bass. Mindful Money. (2011). Can small businesses save the UK economy? [online] Available at: http://www.mindfulmoney.co.uk/investment-insight/investing-strategy/can-small-businesses-save-the-uk-economy/ (accessed 14 April 2015). Morrison, A., Breen, J and Ali, S. (2003). Small business growth: Intention, ability and opportunity, Journal of Small Business Management, 41(4), pp. 417-425. Perry, C.S. (2001). The relationship between written business plans and the failure of small businesses in the U.S., Journal of Small Business Management, 39, pp.201-209. Peters, T. and Austin, N. (1985). A passion for excellence. New York: Random House. Petkova, A.P. (2009). A theory of entrepreneurial learning from performance errors, International Entrepreneurship and Management Journal, 5(4), pp.345-367. Rayz. (2015). Rayz story. [online] Available at: http://rayz.co/RayzStory (accessed 13 April 2015). Rayz. (2015). Our values. [online] Available at: http://rayz.co/RayzValues (accessed 12 April 2015). Ropega, J. (2011). The reasons and symptoms of failure in SME, International Advances In Economic Research, 17(4), pp. 476-483. Scheers, L. and Radipere, S. (2007). Why are so many managers not managing?, African Journal of Business Management, 1(4), pp.85-89. Temporal, P. (2006). B2B branding in Malaysia: a guide to building successful business to business brands. Selangor: Kanyin Publications. USBA. (2009). The small business economy: a report to the President, United States Small Business Administration. [online] Available at: http://www.sba.gov/advo/research/ sb_econ2009.pdf (accessed 14 April 2015). USBA. (2009). Presentation to the SEC Forum, United States Small Business Administration. [online] Available at: http://www.sec.gov/info/smallbus/2009gbforum/sba-presentation.pdf (accessed 14 April 2015). Wagner, D., Block, J.H., Miller, D., Schwens, C. and Xi, Q. (2015). A meta-analysis of financial performance of family firms: another attempt, Journal of Family Business Strategy, 6(1), pp.3-13. Ward, M. and Rhodes, C. (2014). Small businesses and the UK economy, Library House of Commons. Whitely, R. and Hessan, D. (1996). Customer centered growth: five proven strategies for building competitive advantage. Reading: Wesley Publishing. APPENDIX: A PERSONAL REFLECTION Throughout the course, I have learned two fundamental lessons about managing small businesses. Small businesses are complex organisations that must consider the entire value chain, recognise how to exploit resources (both human and tangible), and be flexible toward changing market conditions. I learned that it is vital to understand what is going on in the external market, using such models as PEST, SWOT and Porter’s Five Forces, to fully recognise the opportunities and threats facing a small business. Small businesses must understand what competition is doing in terms of competitive rivalry and even set benchmarks against successful businesses in order to develop a business model that is top performing. A manager that does not understand that change is required to build operational model that recognises contingencies will likely become a statistical failure and not achieve market success. In class, I was at first sceptical about some of the theories of small business management, including the importance of networking. Theory would seem to state that businesses gain customers through their value chain without having to seek opportunities to improve socio-professional relationships. However, by observing how class members interact together to discuss concepts and project tasks, I learned that people really do work together more effectively when they build a foundation of trust and camaraderie. The class also gave me opportunities to learn about different environmental analysis tools and models to understand how to build a business model that can better service a changing market. I learned all of the different inter-dependencies in small business, such as operations being linked with customer service and that failure in any one of these factors could drag down another business aspect. My ability to make easy contact with the management of Rayz was another networking opportunity and the trust we had built during my employment tenure made it easier to openly discuss many elements of business management. This ease of discussion built superior learning that managers of small businesses must have multiple competencies, including research, interpersonal skills, management talent, creativity and leadership if the business is to be successful. I have decided, as a result of this class, to be more diligent in exploring various journals and other empirical studies to show how to put theory into small business management practice and conduct more interview research with real-world business professionals to aid in higher learning about small business management. Read More