Frances Ngozi Ekwulugo
Ethnic minorities account for eight per cent of the British population but in some parts of London it is reported that ethnic minorities account for more than fifty per cent of the local population. This geographical concentration has an impact on their economic contribution to the local economy. The increase in ethnic minority businesses in the UK, in particular London, indicates that the number of such businesses is growing and playing an important part in the London economy. This growth in the number of ethnic minority businesses in London has generated considerable interest among academics, practitioners and policy-makers as to how these businesses are performing.
Studies confirm that more people from minority ethnic than white backgrounds are starting their own businesses. Research has shown that the most entrepreneurial groups in the UK are black Africans, though they are more than three times more likely to start a business than their white counterparts, their business failure rate is also higher than that of any other group.
The reason for the high business start- ups of the ethnic minorities could be their desire to exercise more control over their lives and careers or, less positively, because they are unable to find employment in the mainstream economy due to labour disadvantage and other socio-cultural constraints.
Ethnic minority businesses need to scale up their activities in order to compete effectively with the mainstream businesses. These businesses run by people from ethnic minorities are not homogenous and it has been recognised that they are run by people of different characteristics and experience. This is important if their involvement in entrepreneurial activity is to be understood and appropriate policy responses developed to enhance their performance.
Studies show that the cultural diversity between ethnic minority groups in London is reflected in differences in business entry motives, patterns of finance, the nature of business activity, women’s involvement in business, and the extent of their dependence on the same or a similar ethnic labour force. These have important implications for market- driven management skills.
The increasingly competitive environment in which the ethnic minority businesses operate necessitates market-driven management practices as a means of meeting the needs and wants of customers and improving performance. This, in marketing terms, implies that organisations should be market orientated. The extent to which the ethnic minority businesses have adopted market orientation is not very clear and there is very little empirical study in this area.
Many studies have shown that ethnic minority businesses do not trust authorities such as government agencies and financial institutions. It is a fact that the degree of trust between people as well as between organisations determines to a large extent the quality and efficiency of patterns of interaction and transaction which connect the various actors in societies. Low levels of trust affect enterprise growth and competition and it is assumed that organisations function normally only if there is a certain level of trust. Managers are able to take serious decisions if there is trust amongst employees and other stakeholders. In marketing terms this lack of trust could be due to lack of market orientation.
Market orientation is based on the ability of managers to take effective decisions that would enhance growth. Market orientation has also been reported to have a positive effect upon performance. The performance of the ethnic minority businesses is a function of the many barriers they face such as poor access to credit facilities, improvised customer base, out-dated run down premises in secured crime-ridden environment, as well as discrimination, and racism. They lack the management skills to make the right decision. They lack finance to grow their businesses. Banks demand collaterals before loans are made. The majority of ethnic minority businesses have none as they are mainly immigrants. Not only do the banks demand unattainable collaterals, the ethnic minority businesses claim that the banks discriminate against them. They lack the managerial skills and trust needed to market their product/services. In order for the ethnic minority businesses to improve performance there is need to understand the barriers and seek to improve the competitiveness of their businesses. It is also speculated that the characteristics of SMEs could be part of their constraints as well as part of their success.
In conclusion, although, many studies in the area of ethnic minority businesses have emerged in the literature over the past decade, very few of them have addressed the issues of market- orientation, trust and performance. What have not been reported are the effects of market orientation on the level of trust and how does trust affect performance of ethnic minority businesses?
There is still more to learn about the ethnic minority businesses, how market orientation leads to greater customer satisfaction, which results in repeat purchase. There is need to test and evaluate customer satisfaction. Economic performance (profitability) and non-economic performance are possible consequences of market orientation. It is notable that very few studies have focused on the relationship between market orientation and non-economic performance of the ethnic minority businesses. Further research and analysis should be carried out to investigate the relationship between market orientation and stakeholder’s orientation on performance of the ethnic minority businesses.
Dr Frances Ngozi Ekwulugo, Senior Lecturer, University of Westminster