Viva Voce

The Impact of Entrepreneurial Marketing on SME Performance : A Study in Klang Valley, Malaysia

Hazrita Ab. RahimID : 4100086

2015

Issue

• SME consist of 70% of the Malaysian economy contributor yet it has a high failure rate and low survival rate (SME Corp, 2010).

• Conventional marketing is expensive and often a waste of effort. The sole objective of SME is to generate sales.

EpistimologyBased on Schumpeter (1960), entrepreneurship process includes innovation in creating new products/services, processes, market and strategy (Crane, 2010). So accordingly, this process is considered as a way to create sustainable advantage in market which allows identifying new needs and demand of costumer and meet their satisfaction (Martin, 2009).

On the other hand, marketing is an organizational function and a set of process for create, communicate and deliver value to customer and manage relationship with them in order to achieve profitability and value for organization and its stakeholders (Fillis, 2000).

• The focus of this presentation is on small businesses and,

• Using Entrepreneurial Marketing (EM) approaches• As such we challenge traditional notions of

marketing & management theory and practice. • How?• The presentation reports on the issues for small

business; and addresses some of the issues facing business owners, managers and marketers in contemporary business environments.

SME Growth and Entrepreneurial Marketing

Agencies Small Enterprise Medium Enterprise The Malaysian Agencies 1) Industrial Co-ordination Act 1975,

Ministry of International Trade and Industry (Amendment 1986)

Paid-up capital of RM 2.5 million and engaging 75 full-time employees

2) Small and Medium-sized Industry Development Corporation (1995)

Paid-up capital of less than RM 500,000 and employs full time employees not exceeding 50 people

Paid-up capital of RM 500,001 to RM 2.5 million and employs full time employees of between 51 to 75 people

3) Small Scale Enterprise Division, Ministry of International Trade and Industry (1990)

Paid up capital not exceeding RM 500, 000.

4) Credit Guarantee Corporation Malaysia Berhad

Paid up capital not exceeding RM 10, 0 000 for ‘non-Bumiputera’ enterprise and RM 200, 000 paid up capital for Bumiputera*.

5) The National Trust of People (MARA)

Paid up capital less than RM 200, 000.

International Agencies 1. The World Bank (1984) 2. United Nation Development

Organisation (1986) 3. Asian development Bank (1990)

Employing fewer than 50 employees

Employing between 50 to 199 employees

Researchers 1.Salleh, M. I. (1990) 2. Mohd Asri (1999)

Employing fewer than 50 employees

Employing fewer than 200 full-time employees

Challenges for SMEs

• Introduce new products

• Market penetration

• Being copied by competitors

Constraints of SMEs

• Lack of time to manage• Lack of business resources- finance, employees,

marketing experience• Difficulty in predicting future market changes-market

research costs-marketing & business planning- especially in fragmented/highly competitive markets

• Limited geographic scope in large markets because of size

The EM perspective

• Global research in different sectors and markets

• Globalization, developing regions, new economies, sustainability through economic crises, e-business.

• We have learnt from what successful growth focussed firms do- i.e. differentiation of products/services, niche markets, blue ocean strategies

Gardner (1994, p. 73)

‘‘the interface of entrepreneurial behaviour and marketing is that where innovation is brought to the market. Marketing’s role is in innovation, then, is to provide the concepts, tools, and infrastructure to close the gap between innovation and market positioning to achieve sustainable competitive advantage.’’

Entrepreneurial and SME Marketing

• Relationship Marketing• Getting close to your customer/markets• Leading customers- co-creation- incremental/ radical

innovations• Networks- business, innovation, marketing, industry,

personal contact networks (PCNs)• Opportunity seeking- new markets, extended

product/service lines, shared opportunities, partnering, alliances

• Reputation effects- branding for small business

Research Gap

• Marketing problem within SMEs yet to be explored

• What can improve the performance of SME

• EM may have a positive impact on firm’s performance

Differences between conventional and entrepreneurial marketing

Marketing principles Traditional Marketing Entrepreneurial Marketing

Strategic orientations Customer orientated

(market driven)

Innovation oriented (idea driven)

Strategy Top-down approach:

segmentation,

targeting, positioning

Bottom-up approach: targeting a limited base

of customers, further expansion

Methods Marketing mix (4/7 P’s) Interactive marketing methods, word-of-

mouth, direct selling, referrals

Market intelligence Formalized research and

intelligence

Systems

Informal networking and information

gathering

Traditional Marketing Entrepreneurial Marketing

Basic Premise Facilitation of transactions Sustainable competitive and market control advantage through value- creating innovation Orientation Marketing as objective, Central role of passion, zeal, dispassionate science persistence and creativity in Marketing Context Established, relatively Envisioned, emerging and stable markets fragmented markets with

high levels of turbulence

Marketer's Role Coordinator of marketing Internal and external change mix; builder of the brand agent; creator of the category Market Approach Reactive and adaptive Proactive approach, leading approach to current market the customer with dynamic situation with incremental Innovation Innovation Customer Needs Articulated, assumed, Unarticulated, discovered, expressed by customers identified through lead users through survey research Risk Perspective Risk minimization in Marketing as vehicle for marketing actions calculated risk-taking;

emphasis on finding ways to

mitigate, stage or share risks Resource Efficient use of existing Marketing as vehicle for Management resources, scarcity mentality calculated risk-taking; emphasis on finding ways to mitigate, stage or share risks New Product/ Marketing supports new Marketing is the home of Service product/service innovation; customer is co- Development development activities & active producer Development and other technical departments Customer's Role External source of Active participant in firm's intelligence and feedback marketing decision process, defining product, price, distribution and communications approaches

Year Milestone Impact 1999 Journal of Research in Marketing and Journal of Research in Marketing and

Entrepreneurship created (J. Day, Entrepreneurship provided an academic Reynolds, D. Cardon, G. Hills) journal dedicated to EM which increased the acceptance of EM scholarship

2000 Special issue of Journal of Marketing : Provided additional credible publication

Theory and Practice on the MEI (M.Miles) outlet for scholars of EM

2001 Lodish, Morgan and Kallianpur publish This text enhanced the credibility of EM a book based on their pioneering MBA as a result of Wharton Business School's course in EM Reputation

2002 Bjerke and Hultman publish Increased the visibility and credibility of Entrepreneurial marketing : A construct work in EM and helped define and for integrating an emerging bound the EM construct entrepreneurship and marketing Perspective

2003 First conference on marketing, The interest extended outside the entrepreneurship and innovation Anglo-American area interface in Germanis-Karlsruhe

2004 Buskirk and Lavik publish EM textbooks move toward the Entrepreneurial Marketing mainstream in the U.S market

2005 International Journal of Technology IJTM was another academic journal Marketing created initiated at MEI which emphasis on technology intensive products

2006 20th UIC Research Symposium on For the past 20 years, the symposium Marketing and Entrepreneurship has been a catalyst for encouraging high quality scholarly thought and research at MEI

Hypothesis• H1a : Innovative marketing has an impact on SME performance• H1b : Proactive marketing has an impact on SME performance• H1c : Resource leveraging has an impact on SME performance• H1d : Risk taking has an impact on SME performance• H1e : Opportunity focus has an impact on SME performance• H1f : Intensity has an impact on SME performance• H1g : Value add has an impact on SME performance

• H2a : Firm age has an impact on SME performance• H2b : Firm size has an impact on SME performance

Hypothesis

• H3a : Education level has an impact on SME performance

• H3b : Marketing knowledge has an impact on SME performance

• Unit of analysis – firm level• Data drawn from SME Corp 2010 database• Quantitative method• Structured questionnaire using 5-point Likert

scale• Data analyzed using SPSS version 20• Multiple regression with split data• Eleven suggested hypothesis

Theoretical FrameworkEntrepreneurial Marketing (EM)

Innovativeness (1a)

Proactiveness (1b)

Resource Leveraging (1c)

Risk Taking (1d)

Organizational Theory (OT)

Firm’s Age (2a)

Firm’s Size (2b)

Human Capital Theory (HC)

Education Level(3a)

Marketing Knowledge(3b)

Performance of SME

Sales Growth

Variables Author & Year Published Firm Size Haltiwenger et. al (2014), Bates (2002), Hall (1995), Storey Firm Age Davidsson et al. (2002), Ensley et al. (2002), Orser et al. (2000), Glancey (1998), Hall (2006, 1995), Variyam and Kraybill (1993), Birley et. al (2000, 1994, 1990), Kantis et. al (2004), Jovanovich (2009, 2010), Haltiwanger et. al (2014). Education Pena (2002); Lussier and Pfeifer (2001); Cressy(1996); Hall (2006, 1995); Bates(2002); Cooper et al. (1994); Cooper et al. (1992); Davidsson (1989), Yaseen (2007), Greve et. Al (2006), Al-Ali et. al (2006), Raush et. al (2005) Marketing Mavondo et. al. (2009), Lin et.al (2008), Foley (2005), Nonaka & Knowledge VonKraugh (2009), Cowan (2000), Polanyi (1995) Entrepreneurial Gilmore (2010), Collinson & Shaw (2011), Stokes (2000), Hultman (1999) Marketing Hughes & Morgan (2007), Bhuian (2005), Merlo et. al (2009). 1) Innovativeness Gaddefors & Anderson (2008), Uslay & Teach (2008), Kraus et. al (2012) 2) Proactiveness Hill and Fielden (2002), Ratanuga, Withanage and Tileka (2009), 3) Resource Kriz & Flint (2006), O'Dwyer (2009), Joshi (2008), Marcati et al (2009), Leveraging Rhee et al (2010), Hughes & Morgan (2007), Jantunen (2005) 4) Risk Taking Backbro & Nystrom (2006), Duus (1997), Miles & Darroch (2006), 5) Opportunity Morris et. al (2002), Webb et. al (2011), Morgan (2009) Focus Nicholas (1998), Gelb and Gregory (2011), Siow, Bhatia & Anwar 6) Intensity (2011), Schnellenbcah (2005), Helmers (2009), Richard et. al (2012) 7) Value Add Naidoo (2010), Morris, M. H., & Sexton, D. L. (1996), Wu (2007). Ren et. al (2010), De Vrande (2009), Mavondo et al (2005) Miller (1983), Fillis (2004), Shaw (2004) Stokes & Lomax (2004), Lee et. al (2001), Merlo & Auh (2009), Schindehutte et. al (2008),

Hughes & Morgan (2007), Liu (et. al 2010), Doloreaux and Shearmur (2011)

Hashim, Ali and Fawzi (2005), Liu (et. al 2010), Sun (2011), Doloreaux and Shearmur (2011), Sciarelli, Corte, Celiento (2005), Success/Failure Shaw (2001), Bhatia & Anwar (2011), Scnellenbach (2005), Helmers (2009) Model Performance Atuahene-Gima & Ko (2001, 2005, 2011), Bhuian et. al (2005), Morris & Paul (1987), Boso et. al (2012), Thukral et. al (2008), Kocak & Abimbola (2004), Bjerke & Hultman (2002), Carson (2010), Collinson & Shaw (2001), Bhatian & Anwar (2011), Scnellenback (2005), Helmers (2009)

Previous measurement of firm growth

Research Design

Population

• 11,000 SMEs listed in SME Corp listing for Klang Valley are

• According to Sekaran, S = 370• Total respondant, N = 271• Formula = 271/370 *100 = 73%• Non-respond rate = 26%

The expected model of this proposal would be:

Y = f (β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + β6X6 + β7X7 + β8X8 + β9X9 + β10X10 +

β11X11 + ɛ

Where:Y = performance of SMEX1 to X7 = Entrepreneurial marketing variableX1= ProactivenessX2 = InnovativenessX3 = Resource LeveragingX4 = Risk TakingX5 = Opportunity FocusX6 = IntensityX7 = Value AddX8 and X9 = Organization demography variable

X8 = Firm AgeX9 = Firm Size

X10 and X11 = Human capital variableX10 = Education X11 = Marketing Knowledge

Variables Frequency Percent

Owners/Entrepreneurs' Characteristics

1 Male Owner 210 92.9

2 Female Owner 16 7.07

Firm Characteristics

3 Type of business in retail sector 86 30.2

4 Type of business in service sector 156 54.7

5 Type of business in manufacturing 15 5.3

6 Non limited liability ownership 92 32.3

7 Limited liability ownership 154 54.0

Firm Strategy

8 Registered with SSM 196 68.8

9 Not Registered with SSM 71 24.9

Categorical Variables

N Minimum Maximum Mean Std. Deviation Skewness Kurtosis

Statistic Statistic Statistic Statistic Statistic Statistic Std. Error Statistic Std. Error

Proactiveness 270 1 5 3.44 1.146 -.840 .162 -.210 .322

Innovativeness 270 1 5 3.48 1.201 -1.061 .162 .030 .322

Intensity 270 1 5 3.33 1.353 -.502 .162 -.996 .322

Opp. Focus 270 1 5 3.53 1.215 -.897 .162 -.172 .322

Resource Leverage 270 1 5 3.11 1.203 -.577 .162 -.856 .322

Risk Taking 270 1 5 3.15 1.268 -.506 .162 -.917 .322

Value 270 1 5 3.13 1.375 -.451 .162 -1.194 .322

Age 270 1 5 3.65 1.131 -.889 .162 .016 .322

Size 270 1 5 3.53 1.215 -.897 .162 -.172 .322

Education 270 1 5 3.55 1.155 -.906 .162 .063 .322

Mktg. Know 270 1 5 3.47 1.092 -.138 .162 -1.080 .322

Valid N (listwise) 270

Mean Std.

Deviation Alpha

Cronbha

N Proactive 3.44 1.146 .939 270 Innovative 3.48 1.201 .940 270 Resource 3.33 1.353 .940 270 Risk 3.11 1.203 .939 270 Opp. Focus 3.11 1.203 .939 270 Intensity 3.45 1.147 .940 270

Value 3.13 1.375 .939 270 Mktg Know 3.33 1.353 .940 270

Firm Age 3.40 1.307 .940 270 Firm Size 3.31 1.089 0.936 270

Pearson Correlation Matrix

  Unstandardized Coefficients

Standardized Coefficients

T Sig. Collinearity Statistics

  B Std. Error Beta     Tolerance VIF

(Constant) -.609 .521   -1.170 .243    

Innovativeness (X1) .186 .085 .157 2.203 .029 .796 1.257

Proactiveness (X2) .202 .080 .209 2.513 .013 .583 1.715

Resource Leveraging (X3) -.288 .089 -.273 -3.242 .001 .570 1.753

Risk Taking (X4) -.146 .074 -.130 -1.969 .050 .934 1.071

Opp. Focus (X5) .083 .065 .091 1.285 .200 .805 1.242

Intensity (X6) .148 .072 .133 2.046 .042 .950 1.052

Value Add (X7) .049 .081 .042 .606 .545 .827 1.209

Firm’s Age (X8) -.019 .081 -.013 -.237 .081 -.0124 1.031

Firm’s Size (X9) -.026 .111 -.013 -.237 .059 -.088 1.088

Education (X10) .176 .063 .187 2.771 .006 .892 1.121

Mktg. Know (X11) .062 .063 .065 .994 .321 .960 1.042

Dependent Variable: Sales Growth            

Collinearity Diagnosticsa

ModelEigenvalu

eCondition

Index

Variance Proportions

(Constant)

  

X1 X2 X3 X4 X5 X6 X7 X8 X91 1 9.162 1.000 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00

2 .175 7.228 .00 .03 .09 .03 .01 .02 .00 .00 .45 .023 .143 8.016 .00 .01 .15 .26 .03 .00 .00 .04 .04 .094 .126 8.516 .00 .00 .21 .00 .02 .01 .05 .52 .07 .015 .112 9.052 .00 .02 .14 .03 .30 .07 .00 .29 .02 .006 .084 10.426 .00 .05 .01 .02 .08 .65 .18 .02 .02 .007 .072 11.320 .00 .06 .22 .07 .11 .12 .61 .01 .00 .008 .062 12.174 .00 .69 .09 .12 .21 .00 .02 .00 .19 .019 .044 14.400 .00 .08 .04 .45 .00 .01 .08 .00 .13 .8610 .020 21.483 .99 .06 .04 .03 .23 .11 .05 .11 .07 .02

a. Dependent Variable: sales_growth

Table 4.12 Residuals Statisticsa

Minimum Maximum Mean Std.

Deviation N Predicted Value -.7718 2.4111 .4113 .44524 270 Residual

-1.67626 10.09142 .00000 1.17127 270

Std. Predicted Value -2.657 4.491 .000 1.000 270

Std. Residual -1.402 8.442 .000 .980 270

a. Dependent Variable: sales_growth

  Unstandardized Coefficients

Standardized Coefficients

T Sig. Collinearity Statistics

  B Std. Error Beta     Tolerance VIF

(Constant) -0.118 0.374   -0.315 0.753    

Innovativeness (X1) 0.079 0.038 0.157 2.071 0.42 0.952 1.05Proactiveness (X2) 0.027 0.033 0.062 0.819 0.014 0.949 1.054Resource Leveraging (X3) -0.081 0.042 -0.144 -1.917 0.057 0.957 1.045

Risk Taking (X4) -0.042 0.042 -0.077 -1.004 0.317 0.916 1.092Opportunity Focus (X5) 0.083 0.034 0.187 2.445 0.016 0.941 1.063

Customer Intensity (X6) 0.05 0.036 0.105 1.406 0.262 0.976 1.024

Value Add (X7) 0.107 0.044 0.18 2.405 0.017 0.973 1.028Firm’s Age (X8) -0.02 0.036 -0.041 -0.541 0.59 0.962 1.04Firm’s Size (X9) -0.064 0.036 -0.138 -1.757 0.081 0.891 1.123Education (X10) 0.038 0.037 0.078 1.01 0.014 0.918 1.089Marketing Know (X11) 0.09 0.04 0.174 2.256 0.325 0.914 1.095

Model Summaryb

Model R R Square

Adjusted R Square

Std. Error of the Estimate

Change Statistics Durbin-Watson

R Square Change F Change df1 df2 Sig. F Change

1 .254a .064 -.008 1.32219 .064 .893 8 104 .525 1.918

a. Predictors: (Constant), mktgknow, innovative, risktaking, value, proactive, resourceleverage, intensity, opportunity

b. Dependent Variable: sales_growth

Model Summaryb

Model R R Square

Adjusted R Square

Std. Error of the Estimate

Change Statistics Durbin-Watson

R Square Change F Change df1 df2 Sig. F Change1 .254a .064 -.008 1.32219 .064 .893 8 104 .525 1.918a. Predictors: (Constant), mktgknow, innovative, risktaking, value, proactive, resourceleverage, intensity, opportunityb. Dependent Variable: sales_growth

Table 4.15 - ANOVAa

Model Sum of Squares

Df Mean Square F Sig.

1

Regression 12.493 8 1.562 .893 .525b

Residual 181.811 104 1.748    

Total 194.304 112      

a. Dependent Variable: sales_growthb. Predictors: (Constant), mktgknow, innovative, risktaking, value, proactive, resourceleverage, intensity, opportunity

Types of Industry Business types              

Services (61%) Restaurant (15%), Catering (29%), Publishing (18.9%), Travel Agents (12.8%)  

Total : 225 FirmsData Processing (11.2%), Accounting & Tax Services (7.8%), Interior Decorating (5.3%)

Manufacturing (22%) Apparel (25%), IT products (35%), Beauty Care (20%), Health Products (20%)  

Total : 75 Firms                

Retail (13%)Sportswear (20%), Stationery (15%), Souvenirs (15%), Food & Beverages (10%),  

Total : 48 FirmsMuslimah Fashion (15%), Children Apparel (15%), Cosmetics (10%)    

Independent Variables

Unstandardized Coefficients

Standardised Coefficients

T

Sig.

95% Confidence Interval

Collinearity Statistics

β Std. Error

Beta Lower Bound

Upper Bound

Tolerance VIF

(Constant) -0.118 0.374 -

0.315 0.753 -0.621 0.856

Innovativeness(X1) 0.079 0.038 0.157 2.071 0.04 0.004 0.154 0.952 1.05

Proactiveness (X2) 0.027 0.033 0.062 0.819 0.414 -0.038 0.093 0.949 1.054

Resource

Leveraging (X3) -0.081 0.042 -0.144 -

1.917 0.057 -0.003 0.165 0.957 1.045

Risk Taking (X4) -0.042 0.042 -0.077 -

1.004 0.317 -0.041 0.125 0.916 1.092

Opportunity Focus

(X5) 0.083 0.034 0.187 2.445 0.016 0.016 0.15 0.941 1.063

Customer Intensity

(X6) 0.05 0.036 0.105 1.406 0.162 -0.02 0.12 0.976 1.024

Value Add (X7) 0.107 0.044 0.18 2.405 0.017 0.019 0.194 0.973 1.028

Firm Age (X8) -0.02 0.036 ..041 -

0.541 0.59 -0.091 0.052 0.962 1.04

Firm Size (X9) -0.064 0.036 -0.138 -

1.757 0.081 -0.135 0.008 0.891 1.123

Education Level

(X10) 0.038 0.037 0.078 1.01 0.314 0.111 0.036 0.918 1.089

Marketing

Knowledge (X11) 0.09 0.04 0.174 1.256 0.025 0.169 -0.011 0.914 1.095

Factors Number of Items

Standard Deviation Mean

Cronbach’s Alpha score of

factors Proactiveness 270 0.60975 3.2633 0.939

Innovativeness 270 0.57098 3.3311 0.94 Intensity 270 0.58155 3.3462 0.94 Opp. Focus 270 0.62533 3.3679 0.939 Resource Leverage 270 0.58409 3.3455 0.939 Risk Taking 270 0.52815 3.2795 0.94 Value 270 0.79902 3.2782 0.939 Mktg Know 270 0.51462 3.3997 0.94

Total Number of Items

KMO Test Sampling Adequacy : 0.746

Approx Chi-

Square 2134.349

Bartlett’s Test of Sphericity dF : 45 Sig : .000

Conclusion and Future Research suggestion

• EM is the strategy to be used by SMEs• A mix of selected items of EM can be utilized• Future research can be implemented at other

region of Malaysia

Variable Measure Expected Relationship

Actual Relationship

1. Education was measured by the level of formal education obtained by the owner or otherwise.

2. Marketing Knowledge was measured by the amount of time

the owner had attended formal business management courses prior to business start-up.

3. Firm age was measured by the age when the firm started

operation. 4. Firm size was measured by the number of employees deployed

in the firms. 5. The innovative marketing approach was through all latest

available digital and internet-based medium strategy. 6. The proactiveness approach on marketing was measured in

unique method. 7. Resource leveraging on marketing strategy deployed was

using all available yet scarce resources to increase sales. 8. Risk taking on marketing strategy deployed was trying new

media and innovative marketing strategies.

9. Being opportunity focused on marketing is on capitalising on all available avenues to increase sales.

10. Value creation of marketing is measured by seeking value in

the growth level of sales volume. 11. Intensity of marketing is measured by the amount or

frequencies of business being pursued by customers.

Positive

Positive

Positive

Positive

Positive

Positive

Positive

Positive

Positive

Positive

Positive

Positive

Positive

Negative

Negative

Positive

Positive

Negative

Negative

Positive

Positive

Positive

Future Publication