CHALLENGES FACING HANDICRAFT BUSINESSES IN IMPLEMENTING PROMOTION STRATEGIES FOR THEIR PRODUCT

CHAPTER TWO

LITERATURE REVIEW

2.1 Overview

This chapter presents conceptual definitions of terms used in the study, theoretical literature, empirical literature, research gap and conceptual framework of the study.

2.2 Conceptual Definitions

2.1.1 Handicraft

Handicraft are those products produced by artisans, completely by hand or with the help of hand-tools and sometimes using mechanical means as long as the direct manual contribution of the artisan remains the most substantial component of the finished product (UNESCO, 1997).

Their special nature derives from their distinctive features, which can be utilitarian, aesthetic, artistic, creative, culturally attached, decorative, functional, traditional and religiously and socially symbolic and significant. They are made of sustainably produced raw materials and there is no particular restriction in terms of production quantity. Even when artisans make quantities of the design, no two pieces are ever exactly alike (Ibid).

2.1.2 Handicraft Business

GEMET (2012) stated that handicraft business is the profession, commercial firm or trade involving the production and distribution of articles that are made through the skilled use of one's hands. Collins English Dictionary 5th Edition published in 2000

defined handicraft business as a particular skill or art performed with the hands, such as weaving, pottery, etc. It also identified that handicraft business can be defined as skill or dexterity in working with the hands.

2.1.3 Small Business Promotion

The American Marketing Association (AMA) defines Business promotion as “media and non-media marketing pressure applied for a predetermined, limited period of time in order to stimulate trial, increase consumer demand, or improve product quality." But this definition does not capture all the elements of modern sales promotion. One should add that effective sales promotion increases the basic value of a product for a limited time and directly stimulates consumer purchasing, selling effectiveness, or the effort of the sales force. It can be used to inform, persuade, and remind target customers about the business and its marketing mix. Some common types of sales promotion include samples, coupons, sweepstakes, contests, in-store displays, trade shows, price-off deals, premiums, and rebates.

Businesses can target sales promotions at three different audiences: consumers, resellers, and the company's own sales force. Sales promotion acts as a competitive weapon by providing an extra incentive for the target audience to purchase or support one brand over another. It is particularly effective in spurring product trial and unplanned purchases. Most marketers believe that a given product or service has an established perceived price or value, and they use sales promotion to change this price-value relationship by increasing the value and/or lowering the price. Compared to the other components of the marketing mix (advertising, publicity, and personal selling), sales promotion usually operates on a shorter time line, uses a more rational

appeal, returns a tangible or real value, fosters an immediate sale, and contributes highly to profitability.

In determining the relative importance to place on sales promotion in the overall marketing mix, a small business should consider its marketing budget, the stage of the product in its life cycle, the nature of competition in the market, the target of the promotion, and the nature of the product. For example, sales promotion and direct mail are particularly attractive alternatives when the marketing budget is limited, as it is for many small businesses. In addition, sales promotion can be an effective tool in a highly competitive market, when the objective is to convince retailers to carry a product or influence consumers to select it over those of competitors.

Similarly, sales promotion is often used in the growth and maturity stages of the product life cycle to stimulate consumers and resellers to choose that product over the competition rather than in the introduction stage, when mass advertising to build awareness might be more important. Finally, sales promotion tends to work best when it is applied to impulse items whose features can be judged at the point of purchase, rather than more complex, expensive items that might require hands-on demonstration (Ibid).

2.1.4 Personal Selling

Personal selling is the personal presentation made by a person to a potential person, or a group aiming to convince him to buy the product or service of the organization (Kotler, et al., 2005).

2.1.5 Advertising

Advertising is a non personal communication targeting the customers through the mass media with a purpose of achieving sales target for the organization (Gupta and Varshney 2000).

2.1.6 Public Relation

Public relation is a planned and sustained effort by the organisation to establish and maintain goodwill and mutual understanding with the public. It is in a form of non personal in news form creating good image about the organisation products or activities that is transmitted through mass media without a charge (Kotler and Keller 2006).

2.2 Theoretical Literature Review

2.2.1 Push and Pull Theory for Small Business

Avera (2004) identified that a small business owner, have to focus on what you have to offer that the big companies cannot offer. It can focus its strengths of you and your company and do not dwell on other things that you cannot do. In operation of small business, it can seem like everything around you is huge and threatening. There is a thought that the bigger companies in your arena will crush your entity and push you to the side. Inspiration can keep you going in the case of all odds instead of taking the easy way out and just giving up on your dreams. What you have to do it to innovate, find alternative ways of accomplishing your goals, and do not try to use the strategies and techniques that the large companies use. The answer may be to use a combination of the “push” and “pull” system of business. This means that you

have to “push” sales to increase profits. Along with that, you need to “pull” clients, especially from the big companies, by winning them over with your commitment to quality and workmanship in your product. The way to “push” your sales is to give your product or service an edge over that the bigger companies have to offer. Since you are a small company you can offer a better price, better quality, or a higher standard of workmanship. You may not be able to compete with a large company when it comes to volume, but you can offer many things that a big company can not. You can add a personal touch to your product or service for each individual customer. The things that a small business can offer can pull clients to your operation and away from the large companies.

Being a small business, you have more worries when it comes to employees and labour costs. There are ways that you can keep labour costs under control, while still keeping the quality of your product or service at a high level. You can make effective use of a staff augmentation company. You can have your company staffed by one of these agencies, which can reduce production and labour costs. Since these agencies do a good job at keeping skilled labour, you do not have to worry about your quality suffering. Using this type of agency will allow you to “push” profits while keeping your prices low and your quality high and this will “pull” clients to your business (Ibid).

2.2.2 Motivational Theory in Small Business Strategy

Inman (1999), traditional motivation theory addresses what people need or require living fulfilling lives, particularly in the context of work. Historically, the work context has related to large organisations where people may feel they are reasonable

secure, but may feel unfulfilled. The move towards breaking up large organisations into Small Business Units (SBUs) and the de-layering and removing of many activities has led to the growth of a number of small businesses. As a result, many of the theories have to be applied or interpreted in a very different way. In order to develop and promote handicraft business therefore, five types of motivational theory have been identified: need, reinforcement, equity, expectancy and goal getting.

2.2.3 Need Theory

The theory focuses on what people require to live fulfilling lives. People have need and different things are important. The need will generate a drive or motivation to fulfill that need. In the traditional work context, behaviour will be directed to fulfilling that need and eventually satisfying it. Once it is satisfied, then another need must be found and the process repeats itself. This will become very apparent when consideration is given to Maslow Hierarchy.

2.2.4 Reinforcement Theory

The theory is an approach to motivation basing upon the law of effect. Behaviour that has been positive consequences tends to be repeated, while behaviour with negative consequences is unlikely to be repeated. Essentially, it is about using need to change human behaviour in order to achieve a desired result. The essential elements in this theory are as follows:

(a) Positive Reinforcement

The use of positive consequences such as praise, a bonus or even a raise to commensurate with the level of achievements to further encourage desirable

behaviour. It is important that rewards and feedback follow the event quickly, and relate to the level of achievement. It is also important to ensure that a reward is made. If it is not, then the disgruntled individual will not perform well the next time. For the small businessman, rewards equate to finding something that works and will create positive reinforcement. For example, the stimulus might be the need to increase the sales or the customer base. The lonely solution is telesales, cold calling by telephone. It is hard job often with little sign of result or reward. However, when there is a response, some interest expressed, and then the long suffering individual feels a tremendous boost, and is motivated to carry on. This illustrates Hammer’s rule about telling people what they have to do.

(b) Avoidance Learning

The element is about avoiding unpleasant consequences. In Hammer’s terms, this is telling people where they are going wrong. Perhaps the best example for the small businessman is better record keeping avoiding the more unhappy consequences of tax authorities.

2.2.5 Equity Theory

The theory emphasis the role played by an individual’s belief in the equity and fairness of rewards in determining performance and satisfaction. The text book definition includes reference to punishment. In an era 100 years beyond Taylor and Fayol, such a view has little place in the modern workplace. Equity can be defined as a ratio between an individual’s job inputs (efforts/skills) and rewards (pay/promotion). The motivation comes from what an employee receives in proportion to the effort applied. This is dangerously subjective and emotive area.

An employee who does well with his sales figures deserves a reward. However, what about the situation where one employee does well because his product is in demand, and his territory easy, while another has a difficult product and or territory. Should the second be better rewarded because of the difficulty?

For the small business, the problems are likely to arise with inequity. Once there is a feeling or inequity, of being taken for granted, of being expected to give too much, then there is a potential for serious problems. Equity theory really emphasizes that the workplace is about human relationships. Only when this is properly recognized, can any meaningful equity assessment be made. The small business needs to be like a family, with everybody gaining from and sharing in the successes. This may mean that everybody is treated as a team member, each has a role and each shares in an objective and clearly equitable manner.

2.2.6 Expectance Theory

This is defined as a theory of motivation where people choose how to behave from among an alternative course of behaviour based upon their expectations of potential gain from the behaviour. Students should recognize certain closeness to equity theory, but with more thought put into what really motivates people. Expectancy theory is based upon behaviour determined by a combination of actors in both individual and the working environment; individual make conscious decisions about their behaviour in the organisation, individuals have different needs, desires and goals, individuals select behaviour patterns based upon expectation of outcome. From these assumptions, the expectancy model can be developed. This has three major components;

(a) Performance Outcome

The individual expects a certain consequence of his behaviour. Students should not find this strange. Part of the motivation to pass the examination is the prospects of an increase in salary and possible promotion. In a small business, an employee might expect financial rewards for generating more sales.

There is a negative side to this, that an employee might pass an examination, or improve sales, but did not get the reward or recognition. This may result in a completely dysfunctional event. The successful student may feel disgruntled if technical effort is not rewarded by a raise and/or promotion, and as a result, leave for perceived better prospects elsewhere.

(b) Balance

This is the power to motivate and it can vary between individuals. Some employees may well be motivated by the prospects of a promotion even if it means a move. Others, in contrast, may have external values that would cause them not to value such a prospect very highly.

(c) Effort/Performance

This is based upon how difficult it will be to perform a task successfully. It is suggested that individuals select the level of performance that seems to give the best chance of achieving the outcome they desire or value. This seems to have something of in Theory X. There is a suggestion that people, while not actually hating work, will always go for the less difficult option. True, if a task is difficult and the prospects of the outcome not very favourable, there will be a distinct reluctance if not

a refusal to undertake the task. Also, by the same token, the prospect of a valued reward will be greeted with enthusiasm.

In this case the craftsmen have to create the right working environment. This means a working environment where people feel that they are rewarded in a meaningful way, want to go the extra mile and want to grow with the business. This means that the fundamental strategy must go beyond just providing for the physiological and security needs. This means selecting a certain type of individual who will work well in a small but growing business. Certain people, no matter how technically suitable they are, may not fit in. Small businesses such as handicraft are demanding. They demand long hours or both owners and employees. Those who are reluctant to give that degree or response, unfortunately have not place. The work place has two components, it has to be right, and the people have to be right (Ibid).

Looking back to these theories it learnt that promoting crafts in handicraft business is critical issues which demand facts. However, handicraft business has been facing different challenges which could be minimized if these theories are effectively applied. In this basis there is an urge need for the new study focusing on challenges facing handicraft business in promoting their products.

2.3. Empirical Literature Review

2.3.1 Trade Promotions Strategies

According to Encyclopedia of Small Business (2002), a trade sales promotion is targeted at resellers, wholesalers and retailers to distribute manufacturers' products to the ultimate consumers. The objectives of sales promotions aimed at the trade are different from those directed at consumers. In general, trade sales promotions hope to

accomplish four goals: 1) Develop in-store merchandising support, as strong support at the retail store level is the key to closing the loop between the customer and the sale. 2) Control inventory by increasing or depleting inventory levels, thus helping to eliminate seasonal peaks and valleys. 3) Expand or improve distribution by opening up new sales areas (trade promotions are also sometimes used to distribute a new size of the product). 4) Generate excitement about the product among those responsible for selling it. Some of the most common forms of trade promotions include point-of- purchase displays, trade shows, sales meetings, sales contests, push money, deal loaders, and promotional allowances.

2.3.2 Challenges Facing Handicraft Business in Developing Countries

Rutashobya and Jaenssson (2004), many donor agencies and international NGOs have engaged in various phases of artisan craft development process. They have identified a number of problems hindering the sound development in a wide range of possible technical cooperation areas. For example, these are lack of promotional and preservation policies, supporting institutions, low craft quality, inability of craft producers to access the opportunities to up-grade their managerial skills and to access business information, lack of capable craft development coordinators and designers, etc. While recognizing these problems, the areas of intervention by donor agencies can rest with the following three main pillars: (i) Policy framework formulation for artisan craft promotion and preservation; (ii) Institutional capacity building for implementing the support programs and activities; and (iii) Strengthening managerial and production capability of craft producing companies and improving technical skills of craftsmen.

2.3.3 Problems at Policy Level

2.3.3.1 Lack of Coherent Policy and Clear Ministerial Responsibilities

Many developing countries recognize that artisan craft development can play a significant role in regional development. However, they lack a specific policy framework to guide the development effort. Furthermore, in most cases, a clear decision on demarcation of ministerial responsibilities for artisan craft promotion is absent. Due to the wide range of development issues, among others, poverty eradication, rural development, preservation of traditional cultural references, promotion of export, human resource development, and technological innovation, governments in developing countries often face difficulties in establishing a proper ministerial coordination mechanism. Furthermore, their current organizational structure and discipline often carry over dysfunctional consequences of this lack of ministerial coordination to the provincial and municipal government levels. Almost all the ministries have their counterpart department in the provincial and municipal governments. Since many governments implement an integral part of promotional activities at the municipal government level, a lack of well-coordinated development effort easily results in the failure of the national promotional programs.

2.3.3.2 Lack of Clear Visions for Promotion and Preservation of Traditional Crafts

In the process of globalization and the free trade policy implementation, most of the traditional crafts have lost their identity and the export market demand has begun to neglect this valuable nature. Innovative handicrafts, adjusted according to cost effectiveness and for changes in the market demand, replaced the true value of the

traditional crafts. The demand driven market force is overwhelming and most of developing countries do not seem to have any powerful counter measures for this eminent trend in the global market. Although many governments recognize the consequential impact, they fail to formulate clear future development visions. They do not seem to acknowledge the importance of preserving “living” traditional artisan crafts, that is, preserving the traditional skills supported by sufficient demand and responding production. Often there is no clear definition of traditional crafts differentiating them from innovative handicrafts. This in turn makes it difficult to define the eligibility of traditional craft producers for receiving the government support for the “living” preservation of traditional crafts.

2.3.3.3 Lack of Recognition on Traditional Values as a Driving Force of Development

International markets consider the traditional values inherited in traditional crafts as an intangible asset. The decision makers in developing countries seldom recognize this potentiality of development and hence traditional craft promotion. They often formulate the related regional development strategies without taking into account this aspect. This traditional asset’s effectiveness is amplified when developing countries combine the development effort with the idea of preserving the true cultural heritage, i.e., archaeological monuments, minority tribes’ life styles including their traditional cloths and crafts, processed food, and construction materials. Furthermore, many developing countries do not know that this traditional cultural asset can offer a complementary tourism development component. Consequently, an idea, for instance, to establish a traditional architecturally designed tourist facility in a scenic

area, copying an old farmer’s house and demonstrating traditional craft production seldom emerge.

2.3.4 Problems at Institution Level

2.3.4.1 Lack of Decisive Government Intervention for Business Development Service Institution-building

There have been arguments on to what extent and how the governments should intervene in institution-building programs. On one hand, the major donor agencies have discouraged the recipients to implement government led business development services (BDS) in light of the economic rational. There will be a potential risk of distorting the process of sound development of private BDS markets, if the governments provide intensively free or subsidized BDS through their technical cooperation projects. A counter argument, however, points out that this principle should not universally be applied. For instance, most of traditional craft producers are settled in remote areas and are not easily accessible for the private led support services. Moreover, their financial positions are too fragile to pay the necessary BDS with the market price. Wherever appropriate, therefore, strong and decisive government intervention is necessary to assure the inheritance of traditional skills and products through appropriate government led HRD programs and BDS. Without this initiative, it would be difficult to lay a strong sustainable development foundation for this marginal sector.

2.3.4.2 Lack of Support Facilities Focusing on Human Resources Development of Craftsperson

Specific technical improvement requirements have common denominators among different artisan crafts. For instance, a proper drying method could improve the raw material quality of the wood and bamboo based innovative handicrafts and all types of artisan crafts could enjoy design improvement. However, the appropriate government authorities have made very limited efforts to solve common technical problems shared by various artisan craft producers. Very few integrated Research and Development (R& D) and training facilities exist serving the different groups to improve their product quality.

Although a number of sector-based or product based R&D and training centres provide services to their immediate clients, craft producers are often not their prime target beneficiaries. It is mainly because they have historically been playing a marginal role in the main stream of economic development. Particularly craftsmen of minority tribes are in most cases scattered in remote areas and hardly in an influential position to appeal HRD needs vis-à-vis the governments. Vice versa, very few governments actively conduct a survey investigating the need, attitude, image, and usage for BDS.

2.3.5 Problems at Craft Producers Level

2.3.5.1 Low Quality

Artisan crafts’ producers in developing countries sell their products in the export markets. The quality, however, is often not at an acceptable level to be exported on a large quantity basis, although they may be attractive for tourists. Furthermore, the

production process developed in the country of origin is adapted to domestic climate conditions. Products exported to foreign countries often do not meet the respective conditions. For instance, wood and bamboo-based crafts using lacquer often experience quality problems, e.g., cracking defects stemming from the change of humidity in the foreign markets. The installation of a proper dryer in the production process may easily solve this type of problem. However, a very few governments try to identify technical problems and the appropriate remedies in an organized manner. Furthermore, most craft producers lack a focus on design improvements, quality inspection systems and checking suitability of production facilities. They tend to be conservative towards the adoption of new technology, which could enable them to produce the same products with more efficiency and higher quality. The general lack of awareness of the importance of quality is a great weakness of the craft producers.

2.3.5.2 Lack of Cooperation Among Craft Producers

One of the fundamental problems facing artisan craft development is exclusivity toward or individualism from other communities and even within the same communities. The problem becomes eminent in the area of product quality improvement and joint marketing efforts. Generally speaking, this tendency becomes stronger among traditional craft producers. They tend not to disclose their knowledge nor accept the concept of improving their own competitiveness in a cooperative manner.

2.3.5.3 Low Managerial Capability

Craft producers are mainly engaged in production and are historically not competent in managerial tasks such as sales promotion, market information gathering, inventory

control, work space management. This shortcoming is a standing obstacle for promotion of artisan crafts. Due to their prevailing isolation from urban business activities, they have limited access to BDS providers. Even if they are available, there is a big gap between the needs identified for managerial services and actual willingness to pay for the services. In most of the cases, the financial position of craft producers is too weak to hire these services. They also have limited exposure to the international business practice and seldom maintain a direct business contact with international retailers. Therefore, they are not aware that a new international business linkage often offers learning practices where craft producers can acquire common innovative management methodologies.

2.3.5.4 Lack of Awareness for Traditional Values and Future Potential

Craft producers are often not fully aware of large potential export markets, which could accommodate the ethnic nature of their products. Among local traditional craft producers, there is not little insight into which of their products would be the most worthy items for export, nor is there a clear concept of the product design improvement required. Furthermore, their capacity to realize their potential capacity of production to meet foreign market needs is limited. This is mainly attributable to their lack of contacts in the export markets. As one of the consequences, they simplify the production process and use cheap materials mechanically and chemically processed. As one of the consequences, they simplify the production process and use cheap mechanically and chemically processed materials. The markets accordingly begin to devalue these crafts and put them into a category of cheap miscellaneous crafts for daily use.

2.3.5.5 Lack of Challenging Mind

Most of the craft producers who have inherited traditional skills fail, because there is no challenge and they lack creativity, to adopt new and innovative ideas. This makes it difficult to develop innovative handicrafts with their own initiatives. Also, it is difficult to apply new methodologies and approaches to improve their current production. For instance, due to their conservative nature, they might not easily adopt modern development strategies such as cluster development and practical use of embedded product improvement services offered by foreign buyers and international NGOs.

2.3.5.6 Lack of Clear Understanding on Design Improvement

Design is often understood as a means to develop crafts to meet the consumers’ needs and hence as a means to assure a large quantity of production with modern processing technology. Since the development of the artisan craft industries depends on the products’ market competitiveness, design improvement has become a key for the successful promotion. Policy makers, craft producers and designers in developing countries, however; have overemphasized this aspect. They should not interpret designing crafts in a narrow sense, indicating only exterior appearance of crafts. The basic concept covers wider aspects including the living environment and culture indigenous to the crafts. This notion is missing among policy makers in developing countries and often among designers.

2.3.5.7 Absence of Capable National Designers and Craft Development Coordinators (CDC)

Wholesalers used to play an integral role for bridging the knowledge gaps of craft producers towards meeting market needs. They often fed back the market trend and requested the craft producers to modify the design to meet the respective market needs (Ibid).