Economic agents must be able to efficiently operate their businesses and capable to compete in a fast changing marketing environment. Both the relatively fast changing marketing environment and the constantly higher public demands mean that business practitioners must be able to make quick adjustments with the aims to sustain their business operations, to develop their business (profits) and to strengthen their positions within their organizations.
Judging from the immense potentials in Indonesian markets, small- & medium-sized enterprises (SMEs) can reap these opportunities by employing appropriately oriented marketing strategies. Unfortunately, the amounts of SME contributions in Indonesia are still relatively small compared to the number of operating SMEs in Indonesia. SMEs have the capacity to absorb as high as 97% of the national labour and contributed to around 57% of GDP (Bank Indonesia, 2015).
According to Ina Primiana (2016), even though SME’s contribution to GDP and SME’s labour absorption show increasing trends, SME’s access to supply chain of global production is still very limited. SME’s contribution to global supply chain in Indonesia is only as small as 0.8%. The majority of SMEs do not have information and access to global market.
Moreover, SME’s contribution to Indonesian export in 2015 was only 15.8%, much smaller compared to neighbouring countries in South East Asia. SME’s contributions to export reached 29.5% for Thailand and 20% for the Philippines. In a global scale, SME’s contributions to export reached 55.9% for Germany and around 53.8% for Japan.
In light of the increasing market opportunities, but only small numbers of SMEs that benefited from those opportunities, it can be assumed that it was because the majority of SMEs do not have sufficient internal resources at their disposal, especially in their lack of superior skills that hinder their marketing performances. SME’s low marketing performance was probably caused by their incapability to gain access to market opportunities.
If SMEs cannot gain benefits from market opportunities because their lack of competitive advantages, it will be difficult for SMEs to design an appropriate marketing strategy. An inappropriate strategy will badly affect their marketing performances.
The highly competitive challenges also demand that SMEs need to be more creative and innovative in their efforts. SMEs must be able to build competitive advantages by creating an appropriate marketing strategy to improve their marketing performances.
According to Urban and Star (1991) the success of an organization in gaining its marketing performance will depend on how capable that organization in developing an appropriate marketing strategy for its targeted customer.
An organizational marketing strategy must be accompanied by improvements of internal aspects within organization in terms of superior skill, superior resources and superior control to create organizational advantages.
The methodology in this study is set out with the realization of environmental factors surrounding an SME and subsequently followed by designing an appropriate strategy for that SME. The choice of a marketing strategy by an SME will determine its competitive strategy in improving its marketing performance.
It is inevitable that SME must build a competitive advantage. It is because every organization in an industrial environment will want to be better compared to its competitors.
The sources of SME’s competitive advantage will significantly affect its product market strategy. SME’s competitive advantage will also affect its marketing strategy. And in turn, both SME’s marketing strategy and product market strategy will affect its marketing performance.
Based on a survey on Taiwanese SMEs, Wai-Sum Siu , Wenchang Fang & Tingling Lin (2006) demonstrated that higher-performed SMEs gave higher priority to marketing activities in their organizational planning.
Higher-performed SMEs realize the importance of an appropriate marketing strategy in building competitive advantage. A higher marketing performance will definitely contribute to the success of SMEs.
An SME’s marketing strategy is formulated based on marketing information gained from the results of environmental analysis of business (marketing) and built upon the sources of advantages that the organization has in its disposal. It is also designed by determining the right market segmentation and selecting the target market as well as by implementing mixed marketing on its target market according to the demands of its customers.
An SME’s marketing strategy can also be built upon its internal resources (resource-based strategy). This type of strategy utilizes superior local resources to create core competency in delivering value-added products to gain competitive advantage. By employing this strategy, SME must build upon its internal special skills to create superior core products in order for SME to be able to expand its market share.
The starting point for a marketing strategy lies in its framework with the focus to tackle the changes in a business environment by considering the characteristics of its customers, competitors and its own organization. The objective of a marketing strategy is to make an organization capable to achieve advantage over its competitors.
In a competitive environment, SMEs need to be able to comprehend the characteristics of their customers, competitors that served the same customers, and their own organizational capabilities to tackle those competitions. These factors will also determine the target market that should be selected to be able to benefit from the market opportunities that are presented.
The success of an SME in developing its marketing strategy will depend on its accuracy in identifying market opportunities and challenges in its marketing environment. A marketing environment consists of internal and external factors of an SME. The ability to comprehend a marketing environment must be accompanied by understanding of “what business are we in”.
By implementing an appropriate marketing strategy SMEs can understand about the business that they are in, the conditions of market demands, the strengths and weaknesses of their competitors and their product line-ups and/or service offerings.
SWOT analysis (strength, weakness, opportunity, threat) is needed as a part of marketing environment analysis. A marketing environment consists of both internal and external environments. External analysis is needed to identify factors that are outside or beyond the organization that cannot be controlled by the organization. The purpose of external factors analysis is to identify potential threats and opportunities that are present.
External factors include political and administrative factors, laws and policies, economic factors, socio-cultural factors, technological factors and et cetera.
Meanwhile internal analysis is needed to identify the whole aspects that are inside the organization and under organization control. Internal analysis is also needed to identify organizational strengths and weaknesses. The parameters that are used to identify organizational strengths and weaknesses are key result area, functional management, and balanced scorecard, among others.
Meanwhile, industrial analysis is needed to analyze the intensity of competition in order for the organization to be able to achieve profitability. According to Michael Porter (1990), any strategy will be wasteful if it’s not oriented to be able to face the competition. Organization needs to identify a competitive strategy effectively to be able to achieve competitive advantage.
Porter (2000) identified five set of strengths in an industrial competition, namely: threats from newcomers, competition between existing companies, threats from substitutive products, buyer’s bargaining power, and supplier’s bargaining power.
A competitive strategy is an approach which is used intensively by an organization to win over business competitions. According to Porter (2000), a competitive strategy can be differentiated based on its competitive advantage and its target market, which are: cost leadership, differentiation and focus strategies.
In a general competitive strategy, Porter suggested that in order to be able to compete, an organization must position itself in either one of these aspects: a comprehensive cost leadership strategy or a differentiation strategy. Meanwhile if the target market is relatively limited then the strategy will develop into a focus strategy.
The starting point for a marketing strategy must lie in its framework that is directed to tackle the changes in a business environment by considering the characteristics of its customers, competitors and organization. The purpose of a marketing strategy is to make the organization to be able to gain advantage over its competitors.
A marketing strategy for SME can be built upon its own internal resources (resource-based strategy). This type of strategy harnesses superior local resources to create core competency in delivering value-added products in order to gain competitive advantage. In employing this strategy, SME must focus internally on its special skills to create superior core products to expand its market share.
It is inevitable that SME must build a competitive advantage. It is because every organization in an industrial environment will want to be better compared to its competitors.
The sources of SME’s competitive advantage will significantly affect its product market strategy. Both marketing strategy and product market strategy that are employed by an SME will affect its marketing performance. A higher-performed SME realizes the importance of a marketing strategy in building its competitive advantage. A higher level of marketing performance will definitely contribute to the success of SMEs.
Author : Kasino