The Role of Branding in SMEs: Different Perspective on the Market

This paper examines the role of branding among Slovenian small and medium sized enterprises (SMEs) and attitude of entrepreneurs to branding strategy. The term “branding” is usually dominated by big global businesses which operate on world mostly consumer markets and build their competitive strategies on powerful branding. Also in academic research literature and textbook, efficient brands are frequently mentioned, particularly in connection with large global companies. However, also SME nurture their own specific approach to branding development although these processes may not be on a conscious level of thinking. Many SMEs are facing dilemmas connected with investing money, time, and energy to change the established practice, and to undertake a strategic approach to brand management. Based on extensive literature survey and researchers’ own experience, a questionnaire was developed to measure the branding development attitude of SMEs. A random sample of companies with at least five employees with the purpose of eliminate micro businesses for which the issue of branding may not be that relevant enabled a level of significance which allows generalization of results. By using descriptive statistics and cluster analysis, we were able to determine the use and position of brand management within the strategic orientation context of researched companies. An important result of the study is the classification system of SMEs, with regard to their market position and future perspective. The participating companies were categorized into the following four groups (clusters): (1) ignorant, (2) users, (3) low-cost producers, and (4) differentiation producers. The ignorant are predominantly micro businesses serving only local markets with no ambition for any growth. The users are businesses of early growth which may not be entirely aware of the potential of branding which is consistent to their generic strategy which may not be refined yet. The low-cost producers and differentiation producers already utilize branding to backup their chosen core strategic orientation. While the first two groups tend to be more passive, the last two groups pursue more proactive strategic orientation. The main finding of the paper is therefore an empirical confirmation of the theoretical stand that branding should not be a sole-standing business function but merely embedded into the core generic strategy which a company is following.