CHAPTER ONE

1. Introduction

This chapter introduces the reader to the concepts of e-marketing and Small and medium enterprises (SMEs), it highlights the extent of e-marketing application by SMEs, impact of e-marketing use on the performance of SMEs in Nigeria. The chapter also covers the study gap as well as the objectives and value of the study to various stakeholders.

1. Background of The study

Throughout the last few decades, large corporations began to understand the marketing paradigm shift from traditional print media and radio/television to web-based initiatives, driven even more by the exponential growth in social media and other web based advertising sites (e.g. Facebook, twitter, Konga, Google ads etc ) and mobile technology (e.g. smart phones and tablets), large corporations viewed e marketing as the new greenfield opportunity, Thus Firms and businesses are adopting information technology and internet to market their products and the adoption has gained the attention of researchers, practitioners and policy makers (Gohary, 2012). Businesses are using internet and electronic media as support to their marketing efforts and as a result e-marketing is growing at very rapid pace. In other way we can say that IT revolution has changed the way of doing businesses altogether.

Throughout this exciting period, while large corporations tried to navigate through this previously uncharted territory, Small and Medium Enterprises (SME’s) were predominantly inactive. While dramatically outnumbering larger corporations, SME’s don’t generally have the relative capital (monetary and intellectual) to dedicate to complex marketing campaigns. So while larger corporations jumped at trying to capitalize on the new medium, SME’s either waited for things to mature or in many cases tried to keep up with what had been the status quo (e.g. have a static web site). With these resource challenges, it would be easy to predict the demise of the SME or at a minimum marginalize the ability of SME’s to utilize online marketing. However, as one looks at the nature of how SME’s do business and market themselves, one would be surprised about how their methodology aligns with this new paradigm.

1. E-Marketing

One of the key indicators of e marketing development is the growth of the number of internet users. For nearly 25 years public is having access to the internet. Since then it has been a continuing development and innovating process. People are able to do nearly everything with their computers and other e devices e.g.: shopping, booking, doing researches, communication, etc. Ask any person who spends any amount of time on the internet and it is almost certain that they can tell you about numerous instances of marketing they faced (whether they went looking for it or not). Be it a search engine (e.g. Google Ad Words), similar product referral (e.g. Amazon.com), or the more traditional sponsorship (e.g. contest or product endorsement) web browsing without being swamped by marketing is virtually impossible

Different authors have defined e-marketing differently. Smith & Chaffey (2005) defined it as “Achieving marketing objectives trough applying digital technologies” While Strauss and Frost (2001) defined it as “The use of electronic data and applications for planning and executing the conception, distribution and pricing of ideas, goods and services to create exchanges that satisfy individual and organizational goals.” While reviewing related literature many researchers seem to confuse the term e-marketing with e-commerce, e business and internet marketing. All the terms are used interchangeably, describing almost the same concept. While e-marketing is a term which is broader in scope. All above mentioned concepts come under the umbrella of e-marketing and it also includes mobile marketing, intranet and extranet etc (Dehkordi et al., 2012).

One of the key indicators of e marketing development is the growth of the number of internet users. For nearly 25 years public is having access to the internet. Since then it has been a continuing development and innovating process. People are able to do nearly everything with their computers e.g.: shopping, booking, doing researches, communication, etc. Ask any person who spends any amount of time on the internet and it is almost certain that they can tell you about numerous instances of marketing they faced (whether they went looking for it or not). Be it a search engine (e.g. Google Ad Words), similar product referral (e.g. Amazon.com), or the more traditional sponsorship (e.g. contest or product endorsement) web browsing without being swamped by marketing is virtually impossible

1. Small and Medium Scale Enterprise

According to the Organization for Economic Cooperation and Development (OECD), the characteristics of SMEs not only reflect the economic patterns of the country but also the social and cultural dimensions. These differing patterns are noticeable reflected within different definitions and criteria of SMEs adopted by different countries. Whereas some refer to the number of employees as their distinctive criteria for defining SMEs, others use invested capital, and some other use a combination of the number of employees, invested capital, sales and industry type (Dababneh & Tukan, 2007).

Despite the disparity in the comparative definitions of SMEs, the enterprises have some common characteristics, of which the foremost is that ownership and management are borne by one individual/ family (Scott, & Bruce, 1987) and therefore, decisions are often subjective. Secondly, SMEs require small capital base in general, disregarding of the industry and the country where they are based. Nevertheless, they are often having difficulty in attracting funds for expansion as a resolution of which they have to bank heavily on personal sources.

Thirdly, in practice, the management proprietor hardly differentiates his personal fund from the company's funds and this largely contributes to the inefficiency and non-functioning of many SMEs. For them, most SMEs operate with labor intensive technology. They find it less easy to shift from one product line to something radically different; in fact, most SMEs tie their objectives more closely to the product line than in other matters such as the use of capital. In most SMEs there is less organizational differentiation, higher employee turnover and higher labor investment ratio. Lastly, the rate of business dearth is high, probably due to reasons of low capital, lack of relationship between business life and that of promoter, inadequate market information and low level of operation, amongst other factors (Nweze, 2009).

1. Performance of Small and Medium Scale Enterprise in Nigeria

The performance and growth of small and medium enterprises (SMEs) is a major driver and indices for the level of industrialization; modernization; urbanization, gainful and meaningful employment for all those who are able and willing to work, equitable distribution of income, the welfare, income per capital and quality of life enjoyed by the citizenry (Aremu & Adeyemi, 2011), because SMEs contribute to employment growth at a higher rate than larger firms (Farouk & Saleh, 2011).

The importance of SMEs in the development of economic, reduction in poverty, increase in employment, output, innovation in technology and uplifting in social status and standard is globally recognized and acknowledged in developing as well as in developing economics. Small and Medium Scale Enterprises have been acknowledged to have a prodigious potential for sustainable Development. It is primarily through the growth of SMEs that employees made redundant by large firms have been absorbed back into the work force (Storey, 1994; Frank & Landstrom, 1998). Through the multiplier effect, this employment provides income to regions which stimulate local economic activity, in results, drives wealth and further employment generation (Walker & Webster 2004). In order to compete and sustain successfully, locally, and globally, micro, small and medium enterprises must not only be perfect in their area, but also conserve eventually.

Evenly component of business management, performance management can be one of the biggest challenges faced by businesses in the SME sector, particularly with respect to their survival and competitive advantage. If management is not trained and educated on how to manage finance, Mbonyane (2006) noted that small businesses fail and did not succeed because more often than not cash flow is not properly managed. Performance is from the aspect of financial and non-financial, the main elements of which consist of “sales-based and firm-based." Empirically, it is found that there is a significant relationship between competitive advantage and the sales-based performance of organizations. Profitability, growth, productivity, level of sales revenue, market share and product, return on investments, product added value is used in the measurement of Sales-based performance (Falshaw et al., 2006; Murphy et al., 1996; Wang & Lo, 2003; Brush & Vanderwerf, 1992; Neely, 2005; Spivey & McMillan, 2002). In addition, other previous studies have also further illustrated that there is a significant relationship between competitive advantage and firm-based performance of organizations. Firm-based performance is measured in terms of the emphasis on employee development, customer satisfaction, job satisfaction and efficient organizational internal processes (Murphy et. al., 1996; Neely, 2005; Spivey & McMillan, 2002; Wang & Lo, 2003).

In Nigeria the importance and performance contributions of Small and medium scale business as a creator of employment, in particular, those with low skill level, is widely recognized. In 2002, 98% of all businesses in the manufacturing sector were SMEs operating in Nigeria, providing 76% of the workforce and 48% of all industrial output in terms of value added (Mahmoud, 2005; Odeyemi, 2003; SMEDAN, 2006). SME employs 87.9% of the workforce in the private sector (Kadiri, 2012; Russell Olukayode & Christopher Somoye, 2013). In the agriculture and manufacturing sectors, SMEs employ more than 80% of the total workforce. In the last few years, an increase in employment of SMEs has exceeded the increase in their contribution to GDP, highlighting the

1. Statement of the problem

Despite the fact that internet marketing has proven beneficial to Multinational companies like

Coca cola or Safaricom that have gained a global outreach through the use of globalization in communication, SMEs are seen to take a slow pace in adopting it in their operations. Apple and

Dell rank high as beneficiaries of Internet Marketing through which they have had increase in revenue per annum; SMEs also can gain such advantages and also improve their chances for their survival through the embrace of internet marketing.

Studies conducted in Singapore and Taiwan show the importance of internet marketing to SMEs for their survival. However, it was noted that the knowledge of these benefits were not known to the SMEs hence the small numbers of adoption (Kendell et al, 2001).

Researchers in South Africa clearly highlight the impact played by SMEs to their economy with their contribution up to 16% of their national GDP (Burgess and Bothma, 2007). Highlights of barriers to internet marketing are discussed by studies in South Africa and Botswana where the developing countries are seen to be at a slower pace in adopting to the technologies due to financial and capacity constraints. It was recommended for state governments to support the development of ICT a factor of Internet Marketing. The Kenyan government has developed strategies in support for the IT development in Kenya in its Konza City Strategy (Vision 2030).

Studies in Kenya have been done on the use of Social Media as a strategy for entry of new markets (Gathoni, 2012) as well as its influence on customer service (Mwangi, 2012). Other Findings show that SMEs in their nature were constrained to adopt to technological advancements due to their environmental constraints which lead to their competitive disadvantage in comparison to large Institutions (Wamaitha, 2012).

1. Research question

In view of the problem stated in 1.2 above, the study seeks to address the following questions; to establish the extent SMEs in Nigeria use e-marketing in their businesses? To determine the challenges faced in implementation of e-marketing by SMEs in Nigeria and determine the impact of e-marketing on performance of SMEs in Nigeria.

1. Research Objective

The general objective of this study is to determine the influence of e-marketing on the performance of SMEs. The specific objectives are:

1. To determine how search engine Marketing influences the performance of a SME.
2. To determine how email marketing influences the performance of a SME.
3. To determine how blog marketing influences the performance of a SME.
4. To determine how online advertising influences the performance of a SME.

1. Statement of Hypothesis

The purpose of this research is to investigate the effects of e-marketing use on the performance of Small and Medium Scale Enterprise. The effect of the e-marketing use on marketing activities and performance on SMEs will be categorized two basic dimensions:

1. Pre-sales marketing activities and
2. After-sales marketing (Avlonitis & Karayanni, 2000).

The first set of hypotheses examines the link between the use of e-marketing as expressed by the e-marketing budget and e-marketing tools and Small and Medium Scale Enterprise marketing activities as expressed by Small and Medium Scale Enterprise presales activities and after-sales activities. Many authors have argued that many pre-sales and after-sales marketing activities might be influenced by the use of e-marketing (see, e.g. Avlonitis & Karayanni, 2000; Borders, Johnston, & Rigdon, 2001; Eid & Trueman, 2004; Furnell & Karweni, 1999; Honeycutt, Flaherty, & Benassi, 1998; Lancioni, Smith, & Oliva, 2000; Lord, 2001; Zhang & Duan, 2010). A number of authors have paid attention to the consequences of the adoption of e-marketing on Small and Medium Scale Enterprise pre-sales activities (Daniel & Wilson, 2002; Quayle, 2002; Simpson & Docherty, 2004; Vescovi, 2000; Wen, Chen, & Hwang, 2001). These consequences include faster discovery of customer needs, greater customization of products, faster communication with customers and faster adaptability of customer needs. Other authors have argued that many after-sales marketing activities such as providing better service quality, developing new products, good customer relationships and increased customer satisfaction might be influenced by the use of e-marketing (see, e.g. Avlonitis & Karayanni, 2000; Borders et al., 2001; Eid, Elbeltagi, & Zairi, 2006; Eid & Trueman, 2004). So, it is hypothesized that:

H1: The higher the e-marketing budget, the larger the impact on the pre-sales marketing activities.

H2: The higher the e-marketing budget the larger the impact on the after-sales marketing activities.

H3: The use of the e-marketing tools has a significant positive impact on the pre-sales marketing activities. H4: The use of the e-marketing tools has a significant positive impact on the after-sales marketing activities.

1. Significance of the study

Technology has brought about change that allows benefits to be realized by States Institutions and also persons; their ability to adopt and utilize this technology bridges the difference between them and their counterparts who have not opted for the same. Use of internet for communication to the external brings about competitive advantage to firms who utilize it and hence impacts on their overall growth. Internet marketing which has created visibility of SMEs to global markets has enabled them reach out to untapped customers hence creating better chances for their growth and survival within their industries.

This study is important as it comes at a point in time when SME performance is of widespread concern in both developed and developing countries. A study of the current approaches to SME performance is needed to establish the attention paid to the effectiveness and efficiency of

SMEs. Unless sufficient attention is paid to SME performance, SMEs can fail to deliver their intended services and goods to the public. The study aims at benefiting the policy makers at both national and institutional levels through policy formulation and change of polices in regard to e-marketing and its impact on SME performance.

The study serves to facilitate the development of small businesses through creating factual awareness of the benefits of proper implementation of Internet Marketing on SMEs. Likewise, the results of the study will be used as a basis for further research by other academicians in the field of SME performance. It is hoped that the study will make contributions and add useful information to that which already exists in regard to internet marketing and its impact on SME performance.