Small Business from Small Islands: Discussion (raw materials)

Discussion – Raw Materials


While all successful in accordance with the terms of the investigation, the 5 firms under study use different natural resource inputs (wood, wool, glass and fish). They also exhibit different levels of competitiveness. Saare Paat is based in a country with a very recent history of economic liberalisation; its relatively lower wages allows that and other Estonian firms to compete on cost advantages, maintaining a high level of labour intensity in the production of hand-made wooden boats and other wooden products; the down-side is a relatively higher turnover of staff, presumably moving to better paying jobs in a buoyant labour market. Shetland Designer utilises a ‘putting out’ system to produce its FairIsle Garments. While it enjoys no price advantage and benefits from low worker turnover, it does not enhance or adapt imported technology and its operation remains strongly centralised around its founder and owner, in spite of being physically dispersed. This may explain its relatively lower annual turnover. Snickarboden, Lysi and Mdina Glass do not compete on price advantage, have imported and adapted technological inputs, enjoy low staff turnover, have benefited from links or experiences abroad and have instituted some kind of devolved management structure, even if with elements of ‘family labour’. Snickarboden and Lysi also benefit from the local availability of technological suppliers.

1. Business Set-Up
Apart from the Estonian case (which is a transformation from a former collective venture), the other 4 firms exhibit the typical launch of an SME as a one-person or family affair, based essentially on own financing and/or a bank loan (probably under personal guarantee). Even many years after their establishment, these firms continue to remain controlled or dominated by the owner or his/her close relatives. However, the existence of a ‘third party’ – such as a foreign friend, a business contact, a local supportive retailer or a potential client – is usually crucial and acts as a catalyst to the business set-up and is often a gatekeeper to the crucial off-island or foreign market niches.

2. The Obligation to Export
In all 5 cases, the obvious limitation of the local domestic market means that the decision to export off-island is a foregone conclusion. Unlike other larger markets, one cannot assume that an initial invention or major innovation will be followed by a period of relative stability marked by heavy local demand where “passive entrepreneurs” come in to free-ride on someone else’s intuition. The decision to set up the firm may have been taken along with, rather than separately from, the identification of an off-island or foreign market niche. In the case of Shetland Designer and Mdina Glass, the presence of tourist visitors to their island allows them to ‘export’ their products without incurring additional freight, insurance or distribution costs.

The ‘export-or-perish’ syndrome is a very powerful one on small island territories and may somehow compensate for the absence of ‘domestic firm rivalry’ that elsewhere pushes firms into higher quality products and processes, creating in turn competitive advantage. 4 out of the 5 firms being reviewed have just two, one or no significant domestic competitor.

3. State Support
Shetland Designer has acknowledged strong state support, via local enterprise councils, in various aspects of its operation: capital procurement and upgrade, promotional literature, trade trips as well as premises development. In the other four cases, support by the state or its agencies has been described as nil or marginal. In one particular case, ‘red tape’ was singled out as a negative feature of state involvement. (Such statements need not imply the total absence of state support; but also that whatever is provided by the state directly or otherwise is not valued highly by the recipient small firm.)

4. In-House Training
All 5 firms report that in-house training is a key feature for developing the skills of their employees. All five, except Lysi, have a strong ‘craft’ disposition to their operation; so, much depends on the training of employees or out-workers – along with the inculcation of the corporate ethos – to ensure a product that meets company standards and client expectations. This training is often performed directly by the owner, who thus also doubles up as instructor and the firm’s cultural archivist.

5. Competing on Quality
Only Saare Paat offers products which are less expensive than those of its direct competitors. The other 4 firms must compete on quality to justify a higher-priced product. The quality exigencies of the product are often supported by a specific quality programme. Lysi conforms to ISO 9002 standards while Shetland Designer upholds the Shetland Lady Trademark, which is an attempt at the local branding of quality garments.

7. Combining Production & Consumption
Combining a retail outlet alongside the manufacturing facility proper is shrewd business sense for both Shetland Designer and Mdina Glass. In that way, tourists, other visitors and would-be clients can experience the development of the eventual product; production and consumption become deliberately blurred and overlapping activities and experiences. Manufacturing takes on the character of a ‘looked at’ process, an object of the tourist ‘gaze’ (Urry, 1990) and therefore more readily associated, appropriated and ‘consumed’ as a souvenir.

8. Associating with the Island
Deliberately or otherwise, 4 of the 5 firms under consideration appear to benefit handsomely from their association with their home island. Iceland’s long and proud association with the sea, its fisheries industry and its maritime culture promote the branding of Iceland as a reliable provider of fish or marine related products and derivatives, as are the products of Lysi. Moreover, the tourism industry in Iceland is also branding its product as a high-priced destination with very high standards of natural beauty, purity, cleanliness and general good health: all of which are useful sales pitches to Lysi’s health products. (The Iceland Tourist Board’s sales pitch for 2004 was: “Pure. Natural. Unspoiled.   Iceland… the way life should be.”). Similarly, Malta’s tourism profile is heavily themed with notions of a hardworking and flexi-skilled Mediterranean race; the skill involved in developing the decorative ware of Mdina Glass is thus a way of congealing in time both contemporary labour as well as its historical past, as are other products such as gold and silver filigree or hand-crafted decorative lace, for which the Maltese are well known. Saaremaa (the island of the wood nymph) and its Saare Paat firm are also free-riding on the island and Estonia’s long tradition as a haven for wood. Juniper trees, along with dolomite, windmills and a famous, local, home-brewed beer are considered the symbols of Saaremaa. It is no surprise that most of Saaremaa’s export-oriented firms today are in the wooden boat building or home construction business; while many of Iceland’s export-driven firms are engaged in the fisheries sector. But the close association between product and island is perhaps best advanced by Shetland and its Fairisle garments. Shetland is probably better known for its knitwear than for any other craft product. The textile product is deliberately branded as the quintessential Shetland Islands souvenir, not least thanks to the link between sheep, wool, nature and the garment product to the islands; while local Fairisle knitters engage in ‘co-operative competition’ thanks to their common interest in safeguarding the high international regard of their Shetland Lady label and trademark. The same strategy is being deployed with good effect in relation to Harris Tweed and by a number of Scottish Isles – such as Islay, Jura and Arran – in relation to whisky distilling.

9. An Attractive Quality of Island Life
Meanwhile, Snickarboden stands out in failing to declare any association between its wooden window blinds and the Åland Islands. However, its owner and founder had spent a stint abroad in Sweden, yet decided to return to Mariehamn in order to enjoy what he claims to be ‘a better quality of life’. Although not articulated explicitly, elements of such an enviable ‘quality of life’ on a small island might well include a well-bonded, flexibly-specialist and loyal work-team, strong family structures and other social networks based on mutual knowledge and familiarity, and other significant and long standing ‘social capital’ supports which promote unitarism. The island effect is not only significant in extending and packaging the ‘island lure’ to potential clients, but also to potential entrepreneurs. In so doing, it does well to develop a ‘brain rotation’ strategy which depends on the attraction of foreign brains to the island; or of local brains leaving the island, developing skills, knowledge, contacts and acumen while away, and then luring them back with their added knowledge baggage. This may be one viable response to the challenges of the knowledge driven economy; although, admittedly, such a global outlook may not figure so prominently on the strategic agenda of small island entrepreneurs who are developing products sourced from local inputs. That a significant percentage of an island population may be away at its respective metropole at any point in time facilitates the ‘glocalisation’ of its citizenry and its ability to ‘mix and match’ local virtues with global opportunities.

10. Using the World Wide Web
In spite of the often assumed potential of the internet in transcending space and developing into an effective business tool, the five SMEs from small island territories in this study remain exceptionally unconvinced and sceptical of such prospects. To them, it seems that the best approach to source suppliers, identify clients and develop a market share remains the one they are most comfortable and familiar with: face-to-face encounters and personal knowledge. The development of a presence on the world wide web is important, and most export-oriented firms in the 5 territories now have their own web-site; yet, the internet’s role in actually clinching business remains to be seen. Perhaps the internet is more useful as a marketing tool to those other companies which compete on price. Being involved in an up-market niche may explain why one can afford to be slow in grasping any of the benefits of internet marketing.

Small Business from Small Islands – NISSOS Project 

Overview | Acknowledgements | Introduction | The NISSOS Project and its Partners | Showcasing Successful Manufacturing Firms | Research Methodology | Discussion: Raw materials | Discussion: High-tech | General Conclusions

© 2021 Institute of Island Studies, University of Prince Edward Island. All rights reserved.