Report on SME Management: Northern Monk Brew Company Case Study

This report provides a comprehensive analysis of Small and Medium Enterprises (SMEs), focusing on the Northern Monk Brew Company as a case study. It begins with an introduction to SMEs, their significance, and the challenges they face, including government regulations and competition. The report then delves into the strategies employed by Northern Monk, such as value proposition development, customer identification, and product expansion. It explores the nature of the entrepreneur behind the venture, highlighting the company's branding and customer-centric approach. The SME start-up process is outlined, covering market research, financial planning, business structure, and other key steps. The business concept and competitive advantages of Northern Monk are examined, followed by an application of Porter's Five Forces model and a PEST analysis to understand the external environment. The report also discusses SME internal growth and development strategies, as well as government support. The report concludes with recommendations for SMEs seeking to thrive in a competitive market.

MANAGING SMALL
AND MEDIUM
ENTREPRISE

Table of Contents
INTRODUCTION.............................................................................................................................1
MAIN BODY.....................................................................................................................................1
Challenges SMEs are facing...........................................................................................................1
Strategies formulated by the Northern Monk Brew Company........................................................2
The nature of the entrepreneur behind the venture.........................................................................2
SME start-up process......................................................................................................................3
Business concept & its competitive advantages.............................................................................4
Porter's Five Force Model...............................................................................................................4
PEST Analysis................................................................................................................................5
SME internal growth & development strategy...............................................................................6
Government support to these start-ups...........................................................................................7
CONCLUSION..................................................................................................................................7
RECOMMENDATIONS..................................................................................................................8
REFERENCES..................................................................................................................................9

INTRODUCTION
Small & Medium Enterprises are companies under special category with a certain level of
assets, revenue and number of employees. These are the enterprises with a number of employees
less than 250. The SMEs contribute to bolstering the economy of the United Kingdom. SMEs are
non-subsidiary and independent firms with less number of employees. Further portrays the
innovation, creativity in start-ups along with the abilities of the entrepreneur (Ormazabal and et.
al., 2018). Thus, their importance led the consideration of SME sector of strategic interest for the
efficient growth of the economy.
The organization chosen to understand the concept of small-medium enterprises is the
Northern Monk Brew Company. It was commenced in 2014, and is a part of Breweries Industry
which is located in Leeds, United Kingdom. It is an independent brewery and profit making
company that creates best beer experiences. The report examines the formation of such
enterprises accompanied by various models. The competitive advantage of the chosen company
is explained with the help of effective models along with the challenges they are facing and
support received from the government in order to cope up with the changing environment.
MAIN BODY
Challenges SMEs are facing
There are many challenges a new company faces in its initial period and further in
attaining sustainability in the market. Some of them are discussed below:-
• Government Regulations: Being a small scale business and beer brewing industry, faces
a large amount of government regulations. The Northern Monk Brew Company faced
regulations issued by the Bureau of Alcohol which includes restrictions on the location,
construction and equipment used in brewing. The brewery sector receives a lack of
government support. The restrictions imposed during the lockdown heavily impacted the
business (McDowell and et. al., 2018).
• Competition: Another challenge is their sustainability in the marketplace by attaining
competitive advantage. The line of breweries in the competition includes London’s
Beavertown, Manchester’s Cloudwater Brew Company. Even the industry receives less
support from the government. It is restrictions caused hindrances to compete with the
Global Beer Companies.
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• Growth and quality: The journey to become a sustainable business in the brewery
industry come with many challenges. The growth was affected due to the lockdown
throughout the nation. The company faces additional challenges such as strategies to
expand business without sacrificing the quality.
Strategies formulated by the Northern Monk Brew Company
• Value proposition: Russell Bisset thought that in order to survive in the crush of
competition and thus, developed beer cans to target the youth audience and professional.
Further company used digital labels as an innovative idea to get ‘wow’ look of the
product. Thus, added the creativity led addition of value in the product in order to gain
competitive advantage in the marketplace.
• Identify Customers: Another strategy which the company opts to attract its targeted
customers and fulfil their needs (Ahmad and Krishnan, 2017). The Northern Monk Brew
Company’s target market is 25 to 34 year old professionals and predominantly males. The
company aims to value experiences. The company creates experiences of their customers
by hosting festivals and other events. Further focus on sharing the brand stories of its
customers.
• Product expansion: The Company aims to expand business by creating series of five
coffee flavored beers and each label with the photography in order to attract its
customers. Further the company brought the use of “Scafell”, which is available in the
stores of Tesco with a wider network of distribution.
The nature of the entrepreneur behind the venture.
The entrepreneur is referred to someone who starts its own small business with an
ambition to take financial risks and rewards. They make a significant contribution in the
economy by evolving changes through innovative ideas, designs and also by anticipating the
present and future needs of the people (Polyviou, Croxton and Knemeyer, 2019). Further, the
ability of entrepreneurship improves in the standards of living and wealth in the society. In
context to the Northern Monk Brew Company that aims to create a world around the beers by
capturing the experiences of their customers. The company is a set example of a thriving
company and undeniable talent in United Kingdom. The company is based on its strategic brand
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design, the Robot Food uses different colors to identify the nature of each beer with its style and
flavor. Each beer contains its own personality along with story to influence the customers.
The Northern Monk Brew Company became the first brewery in the United Kingdom to
use the concept of peel and reveal which was a great step towards attaining competitive
advantage in the market. The company supported the people at work by providing flexible
working conditions and other advantages in order to ease the pressure of work. Apart from
strategies formulated to sustain in the competitive market, the company valued the customer
experiences over the product. Further improved the quality of its services and enhanced its
productivity in the industry. However, Northern Monk Brew Company adjusted to the business
environment, but also updating its strategies by adapting challenges and opportunities in order to
become the threat for its competitors among industry (Hinteregger and et. al., 2019).
SME start-up process
Startups are founded by the entrepreneur who want to convert their new idea or
innovation into an action i.e. by initiating a business which they believe may fulfil the needs and
wants of the people. It is important for the organization to adhere the start-up process. It includes
the research for the idea’s potential success and an effective business plan.
• Market Research: The Russell Bisset and Brian Dickson formulated the idea and did a
market research in order to formulate the business plan. This is important to identify the
needs and wants of the customers with an aim to meet its objectives of customer
satisfaction.
• Financial planning: The next step after market research is to identify the methods for
raising funds (Teixeira and Piechota, 2019). The Northern Monk Brew Company in 2018
raised 1.5 million pounds from 2,000 investors through the crowdfunding process.
Further the company used to rebrand its site and for value addition.
• Business structure: The next step is to consider the legal structure which suits best for
the entity. The managing directors of the company created and sold small batches of beer
while their brand building was in process. They opt the common process known as ‘gypsy
brewing’ which has proven successful for many breweries.
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• Registration: After the above steps the company was named after the summit of the
UK’s highest peak. The company believes its beer will achieve highest altitude brew in
the nation.
• License and permit: The government regulations are required to be followed by the
business. The company is registered as a brewer with HM Revenue & Custom and
further, is required for beer duty.
• Accounting system: It plays a vital role in the life of small businesses as it helps to track
expenditures and ensures the statutory compliance. Further provides the quantitative
financial information to its stakeholders. The company opts an effective accounting
system in order to achieve the desired goals and success in the market.
• Business location: The location help business to pursue its business operations and
activities effectively and efficiently. The company is an independent brewery, which is
based in Leeds, UK.
• Promotion of business: Every business is initiated with an aim to imprint the brand
image in the minds of people (DeSanctis and et. al., 2018). The company formulated the
strategies such as revolutionary labels with different colors denoting their flavor and
styles.
Business concept & its competitive advantages
Northern Monk Brew Company is an independent brewery focused on giving its
customers’ best experience of beers. The business aims to provide customers with craft beer
accompanied by attractive packaging. The company raised 1.5 million through its successful
crowdfunding campaign. The company target 25 to 34 year professionals, especially the male.
The Unique Selling Proposition of the company is its craft beer with variety of natural flavors
along with unique label pattern. The company for the first time brought the concept of peel and
reveal in the industry with an aim to attract its targeted market.
Sources of Competitive advantage
Competitive advantage is an ability which helps the business to sustain in the competitive
market (Graafland and Smid, 2017). The sources which will lead to achieve competitive
advantage are as follows:-
• Product: This force of the company helps to achieve competitive advantage. It
premium label along with the usage of peel and reveal labels helped the company in the
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competition. Also created a series of flavored beers each labelled featuring the
photograph and story.
• Quality: The quality is another component which helps to gain competitive advantage.
The company purchased the more equipment with an aim to provide the customers with
valuable beer experiences.
Porter's Five Force Model
This model is used to analyse the external environment and also outlines the competition
in the market (Maksimov, Wang and Luo, 2017). Further help the company to measure the
profitability level in accordance with the changing environment. The model is used by the
company in order to analyse the competitive advantage and potential profitability in the brewing
industry.
• Bargaining power of buyers: it determines the influencing power in the hands of the
buyers. People connect the craft beer production with the crime and drug which lowers
the sales of the beer. Further the Northern Monk position its beer at a premium price
along with the flavored beers for an upscale market. Also the company values the
customer experiences and thus, causing less chance of switching costs.
• Bargaining power of suppliers: Generally the bargaining power of suppliers in
breweries influences the price of inputs. It includes the cost of raw material, wages,
equipment and others. Suppliers can influence the cost of beer because their number is
less and demand is more. The company lowered the price by implementing innovations
such as flavored beer, premium labels.
• Threat of new entrants: The cost of initiating a beer company is a complex based
process as it includes government regulations, alcohol selling license, etc. These creates
barrier to entry in the marketplace. The company formulated strategies such as peel and
reveal to sustain in the industry. The company blocked the development of other local
craft breweries.
• Threat of existing rivalry: This is a strong force which has highest threat for the
companies (Mazzarol and Reboud, 2020). Rivalry is caused when a buyer switches its
brand preferences. The company provides the highest quality product with a vast
spectrum of flavors accompanied by the styles and colors. The company focus on their
innovative production to establish a competitive spirit in the industry. Further, there are
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many companies engaged in producing craft beer such as Camden Hells Lager, BrewDog
Punk IPA, etc.
• Threat of substitute: It is also considered as strong force, the company aims to provide
best customer experiences through its innovative styles. The flavored beer along with the
emotions behind help to attract the youth audience. Though the company has threat from
the Global Beer Companies but the company is formulating effective strategies to sustain
in the competition.
PEST Analysis
Pest analysis (Political, Economic, Social and Technological) is a tool used to analyze the
external factors which influence the operations of the business. Further help to identify the
potential obstacles in order to sustain in the business environment (Planellas, 2017).
• Political: The taxation regulations are heavy for the beer industry and lacks government
support. Everything from its ingredients to its labelling of cans need to be approved.
Further the closure of pubs amid pandemic situation affected the sales incurred by the
company. The brewery industry has not yet received any grants or cut in VAT or any
other support from the government. It becomes difficult for start-up or small business to
comply with stricter rules in order to provide the products to the customer. Not to drink
and drive campaigns backlashes the beer industry.
• Economical: Global Beer Companies are branching worldwide in order to reach new
audiences. It is difficult for small business to easily attain sustainability in the market.
Further, pandemic situation impacted the breweries as the sales are adversely affected. It
is difficult to grow in the midst of a challenging economy. The company collaborated
with the Cumbrian Brewery in establishing ‘Scafell’ and now available in the stores of
Tesco with a wider network of distribution.
• Social: This factor portrays how the customer’s preference and taste affects the
organization (Moyo and Loock, 2019). Many religions discourage the alcohol and even
the studies show the negatively affect the liver. The company provides high quality beers
with different flavors such as it devised the series of five coffee flavored beers. Thus, the
company is combining brewing value with the progressive ingredients and techniques in
order to attract youth audience.
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• Technological: The Company values the customer experience more than its product. Its
‘Scarfell’ is available in the stores of Tesco with a wider network of distribution. The
company with its innovative labels and flavored beer attracted the targeted market. The
attractive cans with peel and reveal label seems effective in attracting its customers.
SME internal growth & development strategy
It refers to the growth of the company with the help of the internal sources. It aims to
improve the internal performance of the company by opting effective strategies and policies like
hiring and recruiting skilled individuals, developing new products, efficient marketing activities
etc.
 Expansion: According to this strategy, the company can raise its level of profitability
either through market development or by expanding its product. The company adheres
the same through three different ways. Firstly, Market Penetration helps to focus and
improve the existing product in the existing marketplace by way of improving the
network of distribution. Secondly, Market Development Strategy helps to target new
demographic area by opening units in various locations (Di Benedetto, 2017). Lastly,
Product Development Strategy helps to effectively bring innovation in the existing
market with an aim to attract the targeted group.
 Market Penetration: It is a strategy used to step into the market. This strategy is
beneficial in measuring the percentage of market share, which a product or service can
cover. Nevertheless, the recent increasing competition in the industry has forced many
small and medium enterprises to leave the market. The competitive company such as
BrewDog Punk IPA is best-selling and a leading craft beer band. Further the valued beer
brands such as Budweiser, Heineken, and Stella Artois are great competition in the
marketplace.
• Diversification: Under this strategy the company steps into new business activities either
in a different manner or same from the existing one. The company developed the series of
flavored beers and innovative packaging to attract its customers. The diversification boost
the company’s brand image and level of profitability. The company is all set to feature
the tap room and will also serve a food menu inspired by the Northern small plates. There
are different type of diversification like vertical diversification in which complementary
products are manufactured with present product line. Next is horizontal diversification in
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which company produces the parallel products. While in concentric diversification both
the businesses are related to each other and in conglomerate diversification two
businesses are completely different from each other.
The Company is using Product Development Strategy by bringing its innovative craft
beer with designed label in the existing brewery market. The company with the help of this
strategy, build its image to survive in competitive brewery industry. The company is
currently producing seven beers with around four specials. As the company aims to provide
better beer experience to its customers.
Government support to these start-ups
• Small Breweries Relief was introduced in 2002 with an aim to help the new breweries to
attain profits and competitive advantage in the marketplace. Further, providing the brewer
which produces less than 5,000 hectoliters a 50 percent discount on beer duty (Larsson,
2018).
• UK government lowered the threshold for breweries in order to eliminate the tax breaks
on the beer the company produce.
• Government guidelines help in addressing gaps of knowledge and find the right path for
growth and success of the business. The British Beer and Pub Association which is
representing pub and brewers across UK is also providing grants to small brewers.
• The Scottish Government is providing additional funding to support brewers. Society of
Independent Brewers (SIBA) produced a letter which was signed by small breweries in
order get proper support amid pandemic situation.
• Restart Grant support business including brewers in local economies amid pandemic
outbreak.
CONCLUSION
From the above report it is concluded that SMEs faces several challenges in order to
survive in the marketplace. Sometimes it becomes difficult for them to conduct marketing
activities due to lack of finance and government support. The report through the Northern Brew
Company discussed the challenges faced along with the company strategies to cope up with such
challenges so as to survive in the market. The report examined the startup process and also its
growth & development strategy in brief. Further discussed the support provided by the
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government to small breweries. Thus, effectively and efficiently discussed the concept of small-
medium enterprises.
RECOMMENDATIONS
• The company further opts the expansion strategy in order to attract new audiences.
Further will help to increase its level of profitability and increase in sales.
• The company should focus more on digital marketing and social amid pandemic situation.
As it will help in marketing mix of the company by evolving marketing strategies to gain
competitive advantage in the market.
• The company must opt effective promotional strategy in order to attract its potential
customers.
• The company must invest on gradual basis on building up the capacity and in
development of its new innovative products. Further the company must mature its
presence through major off trade customers.
• Research and development will help the company to make its customer satisfied by
keeping in view the changing environment. This may help to keep a check on the
customer’s needs and preferences.
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