Updated: Apr 4, 2018
The Basic Factors in Increasing Sales Performance (Survey on Agribusiness Small and Medium Enterprises)
M. Syahirman Yusi, Umiyati Idris
State Polytechnic of Sriwijaya, Indonesia
Candradimuka Social Sciences and Politics Academy, Indonesia
The purpose of this study was to confirm the extent of the marketing environment implications and marketing mix on sales performance in small-medium enterprises (SMEs). SMEs had an important role in absorbing employment, economic services, income distribution, economic growth and national stability. Primary data was collected through survey technique from 155 respondents and taken by random sampling method and was analyzed by path analysis. The result showed that marketing environment, marketing mix, and competitive advantage simultaneously had positive and significant implications toward sales performance in terms of increase of market share and profitability. In an effort to improve sales performance, an understanding of the marketing environment and the application of the marketing mix were a must.
The Flexible Specialization thesis appeared in the 1980s concluded that small-medium enterprises (SMEs) would be more important in the development process. Some Western European countries such as Germany, Italy and the Scandinavian countries have proved that in these countries the number of SMEs is very large and have grown rapidly. When West Europe faced economic instability in the 1980s, SMEs survived; whereas many big enterprises had difficulties. In EU countries, 99.8% of SMEs contributed 56% for GDP and absorbed 67% of the workforce (European Commission, 2008). The empirical facts of SMEs significantly contributed to the economy of a country, both in terms of absorbing workforce and economic growth and development (Turner, et al., 2009).
Small and Medium Enterprises (SMEs) have a very strategic role in improving the welfare of the society, not only in developing countries such as Indonesia but also in countries where SMEs have played a significant role. In Indonesia, the SMEs have important roles either developing economic development or addressing unemployment issues. The growth and development of SMEs make them as sources of growth, job, and income opportunities as well as poverty and unemployment reductions, income distribution, and even entrepreneurial skills (Ayanda & Laraba, 2011; Jasra et al., 2011; Tastan, 2013).
Viewing the role and the existence of SMEs, these developing countries have changed their orientation by empowering SMEs sectors. This is due to the importance of SMEs sectors in strengthening society economy, income distribution, economic growth, developing and sustaining national competition and even in global level (Muritalla et al., 2012). Considering this, some policies to increase competition power by giving empowerment to either financial or non-financial sectors are necessary.
In Indonesia, SMEs are as people’s economic enterprises in the national economy and the existence cannot be ignored, in addition; they have significant roles in the economic life. SMEs are business sectors to absorb a lot of unabsorbed labor force formally so that they reduce government burden in solving unemployment. SMEs are also able to cope with the problems of the population. The expansion of SMEs in rural and suburb areas at least will have impacts on population distribution. In many developed countries, SMEs have roles and importance as a driving force of economic growth, creativity, and innovation in conducting productive business activities (Tastan, 2013).
SMEs sector contribution toward Gross Domestic Product (GDP) of Indonesia increased from 57.84% to 60.34% in the last five years. The workforce absorption of these sectors has increased from 96.99% to 97.22% in the same period (Indonesian Statistic Bureau, 2016). Although the contribution to the GDP has not maximized yet, SMEs have strategic roles in national economic development. In the past economic crisis occurred in the past, most of the big enterprises faced stagnation, even stopped their activities in dealing with the crisis (Hafsah 2004).
SMEs as the object of research is often found in South Sumatera Province as the research areas. With the available potencies and supported by the availability of local resources, SMEs are essential to give a contribution to the investment development and employment absorption. Of the total SMEs noted, 14,623 units of SMEs were with investment value 15 billion IDR and 56,796 workforces were absorbed (South Sumatra Trade Office, 2016); this percentage is important to the growth and economic development of the region, especially in the absorption of unabsorbed labors in the formal sector. This means reducing unemployment and reducing the growing number of poor people directly from year to year.
From the facts above, it shows SMEs have not been completely away from problems or obstacles faced, in addition to existing production problems, SMEs are also lack of accurate information about the marketing environment, especially about market demand. In the business world, the marketing environment is an important and valuable part. An accurate understanding of the marketing environment can help the company in making decisions about which marketing strategy is chosen and determining the steps taken to maintain and grow the business. An understanding of the marketing environment also supports the operational and managerial activities of the organization. For all, it takes a reliable and accurate data processing and can be displayed precisely and easily if needed.
Every business should understand the marketing environment that serves as an information provider for decision making. Marketing environment either micro or macro marketing environments are systems related to the collecting, recording and analyzing of buyers and prospective buyers data (Mcleod, 2001). By understanding the marketing environment, the enterprises can gather information in an integrated and reliable way to anticipate market issues, so that it can finally seize market opportunities. Because of the importance of making marketing decision, the understanding of the marketing environment as a source of information is critical to business success.
Accurate information about the marketing environment can be directed towards developing accessibility to the opportunities gained by the environment. It can also be directed to develop adaptability to future threats. The introduction of good environments will have impacts on the gained strategy quality which in turn give an impact on marketing performance. Likewise, the understanding of the marketing environment is one of the factors of competitive advantage source for companies (Hemmatfar and Salehi, 2010; Shaqiri, 2015), competitive advantage will be a basis for success in winning the competition and support sales performance (Hunt and Arnett, 2004; Porter, 2001 in Hameed, 2009).
An understanding of the marketing environment is a foundation key in setting marketing strategies. The marketing strategy consists of the basic principles underlying management to achieve their business and marketing objectives in a target market; marketing strategy contains basic decisions about marketing, marketing mix, and marketing allocation (Kotler and Keller, 2012).
Marketing mix strategies consisting of product mix, price mix, promotion mix and distribution mix are part of effective marketing strategies (Kotler, 2001). The product is everything that the company tries to offer to its customers; in the product mix, the company tries to adapt the product to the needs of its potential buyers. In the price mix, the setting of price policy is not only based on the willingness of consumers to pay the price of a product but more than that they must also consider the cost set for similar products or competitors products. In the promotion mix, the employer should be able to provide information about products to the consumers, that the product has been available in the market and the product is able to provide adequate benefits and able to satisfy the needs of consumers. Likewise, in the distribution mix, it is how the delivery of products to the hands of consumers. The company considers when and where the product can be obtained by consumers when consumers need it. The company tries to bring its products closer and simplify the consumers in obtaining the product as satisfying their needs whenever they need.
Thus, with information from the marketing environment, management is able to perform marketing mix strategy, a marketing mix strategy is one way of winning competitive advantage. The competitive advantage comes from company-owned resources, this perspective is known as Resource Based View or resource-based perspective initiated by Penrose (1959) in Hameed (2009). According to him, a competitive advantage can be achieved by creating an economic scale and improving management capabilities and technological capacity (Penrose, 1959 in Hameed, 2009).
A sustainable competitive advantage to increase sales performance. Sales performance is the achievement level of the company’s sales achievement as measured in the form of results or performance outcome (Rue & Byard, 1997). Based on the research result of Szimansky, et al., (1993) indicators of sales performance measurement and the competitive advantages commonly used are market share and profitability.
From the description above, it would be relevant to conduct research on SMEs marketing strategy as a source in formulating employers’ policies to increase sales. This applicative research was expected to provide useful information to create business synergies interrelated with increasing agribusiness SMEs sales better in accordance with the principles of ideal marketing. This increase in sales of the ideal agribusiness SMEs was able to improve yield productivity, increase revenues, and contribute to the development of entrepreneurs’ income as economic actors.
From the explanation above, the research hypothesis can be as follow:
H1. The marketing environment both the micro-marketing environment and the macro marketing environment had positive implications for the marketing mix.
H2. Micro and macro marketing environments and marketing mix either product mix, price mix, distribution mix and promotion mix had positive implications for competitive advantage.
H3. Micro and macro marketing environments and marketing mix either product mix, price mix, distribution mix and promotion mix, and competitive advantage in price strategy, differentiation strategy, and focus strategy had positive implications on sales performance.
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