From Outsourcing to Insourcing Brand Management: How Networking Helps SMEs to Become More Brand-Oriented?

Abstract

This conceptual paper develops a model that describes how small and medium-sized enterprises (SMEs) can use their networks to become more brand-oriented. Most often, researchers assume brand orientation as something that simply originates from inside the firm. This study, while acknowledging the internal perspective on strategy formation, argues that firms can develop a brand orientation also through and within networks. The present study builds on and extends the view that SMEs develop their brands with the help of their network partners by explaining how networks can also be used for changing company philosophy. That is, instead of focusing on how the brand is developed and branding-related problems solved by relying on network partners, this study emphasizes the question of how firms construct their strategic orientation and develop a positive attitude towards brands through and within networks. Specifically, the proposed model describes how firms progress from outsourcing brand management to their network partners to insourcing brand management from them, and how this process contributes to SME brand orientation. The study adopts a marketing agency as an example of a network partner having a positive effect on a firm’s brand orientation. The model consists of five stages, namely (1) Early stage, (2) Developing stage, (3) Implementation stage, (4) Reorientation stage, and (5) Confirmation stage. At the early stage, the firm and the agency come into contact and start building a relationship as the firm seeks help and expertise from outside the company. However, it may not necessarily know what it exactly wants when it initially contacts the agency, making it dependent on the recommendations the agency makes. The interaction between the two nevertheless represents a starting point for the development of a brand orientation as it compels the firm to think about its brand and business. At the following stages, the relationship continues to evolve. Importantly, as the firm continuously thinks about its brand, it better understands how to integrate it with its other business activities. Consequently, the first signs of brand orientation start to show as the firm takes a more active role in relation to branding. Stages one through three represent the outsourcing phase in the development of SME brand orientation. That is, the firm may lack adequate skills for branding and hence is dependent on what the agency does; also, it may not be totally convinced of the relevance of branding. Consequently, the firm may find it practical to outsource branding to an outside partner rather than control it itself. However, as the benefits of branding start to concretize after the implementation stage, the firm progresses towards insourcing brand management. This refers to the reorientation stage. As brand performance increases, the company becomes more confident that its investments in branding are justifiable. Furthermore, the firm may also find that it does not necessarily need to rely on external partners as the interaction with the agency at the earlier stages has allowed it to develop an understanding of its brand and what is needed to manage it effectively. However, the firm may still continue cooperating with the agency, but the cooperation changes its form as the firm now takes more control over its brand building. Future research endeavors to further improve the model may address, for instance, (1) the effect of others in the network, (2) continuation of the relationship, and (3) timescale and outsourcing/insourcing overlap. Empirical validation of the model is also called for.