An Impact of E – Commerce on Marketing and Operation in SME in Indonesia

Abstract

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This study is to distinguish the impacts and influence of E-commerce against Small Medium Enterprises (SMEs) in Indonesia. This research has given an overview of the progress in the adoption of E-commerce technology on operational and marketing level. It provides a substantial influence in improving the performance of SMEs, particularly the overall business performane in the Greater Jakarta Area. There are two important viewpoints that this study concentrates on, there are marketing and operations perspectives. It will investigate how these two aspects, both marketing and operations, have affected the performance of the SMEs including the moderating roles of the Firm Size and E-commerce experience. It will then be used to differentiate the impact of E-commerce on marketing and operating sectors and examine how their impact can affect the performance of SMEs in Indonesia. We will be using survey data from 120 correspondents of Indonesian SMEs that have adopted E-commerce technology. The methodology used to analyze the data is multiple linear regression analysis. We will also use moderated regression analysis to determine what the Firm Size and E-commerce experience roles are.

This research has provided an overview of the development in the use of E-commerce on operational level in which provides a significant influence in improving the performance of SMEs, particularly the performance of business in the Greater Jakarta. Whereby the result of hypothesis testing was derived by multiple linear regression method used. There is a positive impact by operational effect applicable to the SMEs from using e-commerce. One of the founding was that operations such as order processing, order fulfillment and supplier development, brought a positive impact on the use of E-commerce, improving the overall efficiency. The less developed impactful effect on the benefits can be gained from the use of SME E-commerce particularly in the short time ahead.

Based on the established hypothesis about marketing effect of E-commerce on SMEs. It is concluded that the usage of E-commerce has a positive marketing effect and significantly help increase the business performance of SMEs. Many companies prefer in increasing their investment marketing effort such as in online advertising, display products as well in brand recognition. Businesses sometimes must often double their marketing effort, as it is still not a common practice for Indonesian to shop online and particularly very difficult for SMEs due to limited resources available at their disposal. The people in Indonesia still have preferential over traditional transactions compared to transacting online.

Based on the results of this research it is proven that E-commerce brings positive advantages for SMEs, so it is advisable for SMEs that have no E-commerce presence to start implementing it. In addition, for SMEs that already have implemented E-commerce technology should be more invested in the operation and marketing aspects in order for the business performance to be optimal.

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Keywords:

E-commerce, SME, Performance, Operations Effect, Marketing Effect, E-commerce Experience

Contents

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I. INTRODUCTION

1.1 Background

1.2 Problem Formulation

1.3 Research Objectives

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1.4 The Scope of Research

1.5 Structure of the Thesis

II. LITERATURE SURVEY

2.1 Structure of the Thesis

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2.1.1 Definition of SMEs

2.1.2 Characteristics of SMEs

2.1.3 Development of SMEs in Indonesia

2.1.4 The success and failure of SMEs

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2.2 E-Commerce

2.2.1 Definition of E-Commerce

2.2.1 Characteristics of E-commerce

2.2.2 Classification of E-commerce

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2.2.3 E-commerce For SMEs

2.2.4 Drivers of Adoption of E-commerce in SMEs

2.2.5 Inhibiting Adoption of E-commerce

2.2.6 Benefits of E-commerce For SMEs

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2.2.7 Disadvantages of Adoption of E-Commerce for SMEs

2.3 Impact Use of E-commerce on Aspects of Marketing and Operations

2.3.1 Impact of the Use of E-commerce Marketing Aspect

2.3.2 Advantages of E-commerce in Marketing Aspect

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2.3.3 Impact of E-commerce on Operation Aspects

2.4 Business Performance

2.5 Firm Size

2.5.1 Definition of Firm Size Company Size

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2.6 E-commerce Experience

2.7 Research Accomplished

III. Research Methodology

3.1 Research Design

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3.2 Theoretical Framework

3.3 Scope of the Study

3.3.1 Analysis Unit

3.3.2 Research Object

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3.3.3 Research Area

3.4 Research Hypothesis

3.4.1 Influence of operations and marketing aspects of the use of E-commerce and the performance of SMEs

3.4.2 Moderating effect on the impact of the use of E-commerce

3.5 Operationalization of Research Variables

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3.5.1 Independent Variable (X)

3.5.3 Variable Moderator (Z)

3.5.4 Demographic Variables / Characteristics

3.6 Population and Sample

3.6.1 Population

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3.6.2 Sample

3.6.3 Sample Processing Techniques

3.7 Data Collection Methods

3.7.1 Primary Data

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3.7.2 Measurement of Variables

3.8 Questionnaire Design

3.8.1 Introduction

3.8.2 Screening Question

3.8.3 Business Profile

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3.8.4 Operations Effect

3.8.5 Marketing Effect

3.8.6 Performance

3.8.7 Profile of Respondents

3.9 Analysis Technique and Hypotheses Testing

3.9.1 Preliminary Analysis

3.9.2 Frequency Distribution

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3.9.3 Validity and Reliability Test

3.9.4 Classical Assumption Test

3.9.4.1 Multicollinearity Test (VIF)

3.9.5 Test Multiple Linear Regression

3.9.5.1 The coefficient of determination Test (R2)

3.9.5.2 Significant Simultaneous Test (F-Test)

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3.9.5.3 Significant Partial Test (t-test)

3.9.6 Moderating Regression Analysis

3.9.6.1 Moderated Multiple Regression

IV. DISCUSSION AND ANALYSIS

4.1 Test Validity and Test the reliability Pre-test

4.1.1 Validity of Test Results Pretesting Questionnaire

4.2 Descriptive Analysis

4.2.3 Descriptive Analysis Performance Variables

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4.3 Sample Profile

4.3.2 How long has the business been operated

4.3.3 How long has the business use of E-commerce

4.3.4 Turnover per year

4.3.5 Total Assets

4.3.6 Total number of Employee

4.3.7 Domicile Enterprises

4.3.8 Regional Marketing

4.4 Classical Assumption Test

4.4.1 Multicollinearity Test (VIF)

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4.5 Hypothesis 1 and Hypothesis 2

4.5.1 Regression Analysis

4.5.1.1 Analysis of Marketing and Operations Effect of Against the Performance (Coefficient of Determination R2)

4.5.1.2 Simultaneous Analysis of Marketing and Operations Effect of Against the Performance (Variance Test Analysis)

4.5.1.3 Analysis of Marketing and Operations Effect of against the Performance partially (T-test)

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4.6 Hypothesis Testing Hypothesis 3 & 4

4.6.1 Moderate Regression Analysis

4.6.1.1 The relationship of E-commerce Experience (Moderator) to the Operations and Marketing Effect against the Performance (hypothesis 3a and 3b Test)

4.6.1.2 Firm Size Moderator size in relation with Operations effect and Marketing Effect on Performance (Hypothesis 4a and 4b)

4.7 Discussion

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V. CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusion

5.2 Suggestions

5.3 Limitations of Research

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5.4 Further Research

Reference

Appendix

1.     Introduction

1.1             Background

Small Medium Enterprises (SME) in Indonesia has a crucial role in developing the national economy, especially on the economic growth and the reduction of unemployment rate. Furthermore, it helps the development of rural areas such as small provinces, villages as well as small islands. Based on world statistic, in order for developing economy to be a developed economy a minimum of 2% from the total population is needed. In 2015 the estimation of the total population in Indonesia are 250 million and the total SME are 57 million, therefore in 2015 Indonesia has 4.3% of SME. But from that 4.3% we can determine the successful rate are pretty small. In order for Indonesia economy to improve significantly, Indonesia has to focus on improving the SME success in the near future.

Nowadays businesses are not constrained in space and time, with the help of information technology, communication between seller and buyer has become efficient and practical. It also helps online transaction for buyer and seller. As we all know, internet development and usage are evolving rapidly in Indonesia. This phenomenon can be seen as the dramatic annual increment in internet usage as well as internet penetration. According to MarkPlus Insight as one of the largest research company in Southeast Asia, the total of Internet User in Indonesia in 2013 is 74.6 million. It shows an increase in 13 million since 2012 of 61.1 million users. The user who access more than three hours per day also shows a dramatic change from 24.2 million to 31.7 million. It shows positive relationship between internet user and netizen who access more than three hours per day.

E-commerce has a positive impact on various business components, several studies were looking at the role of E-commerce in the sub-functions of businesses, such as marketing and operation. Since E-commerce provide an innovative way to manage the available resources efficiently, it can also affect the various sub-functions of the business.

Based on this, the author was interested to analyze more about the effects after the use of E-commerce on the performance of SMEs in Indonesia. The purpose of this research is to distinguish the impact of E-commerce on marketing functions and operating functions and investigate how their impact can affect the performance of SMEs in Indonesia. This study will also be used to investigate the role of moderating variables such as E-commerce experience and SME’s firm size for determining the relationship-impact performance. Therefore, it would be interesting to do the research with the title: “An Impact of E – Commerce on Marketing and Operation in SME in Indonesia”

1.2             Problem Formulation

The number of SMEs regardless of the type of industry or size, is still very limited know of any positive benefit on the use of E commerce. On the other hand, a lot more research to discuss the applications and factors in using e-commerce, but academic studies with a systematic explanation to provide information on positive impact on the use of technology E-commerce, especially in improving the aspect or function of a micro, small and medium enterprises (SMEs) on the performance is still very limited.

Based on the brief description above, the formulation of the problem in this research outlined in the following research questions:

• Is there any effect of the use of E-commerce on operations and marketing aspects to the performance of SMEs in Indonesia?
• How is the role of E-commerce experience and firm size in moderating the relationship between the use of E-commerce impact on operations and marketing aspects of the performance of SMEs in Indonesia?

1.3             Research Objectives

Objectives to be accomplished in this study are:

1. To determine the use of E-commerce on marketing and operation aspects, how positive the impact is on the performance of SMEs in Indonesia.
2. To determine the role of E-commerce experience and Firm size in moderating the relationship between the use of E-commerce in affecting on marketing and operation aspects of the performance of SMEs in Indonesia.

1.4             The Scope of Research

This study is focused on the impact of SMEs that use E-commerce in Indonesia, especially in the Greater Jakarta area (Jakarta – Bogor – Depok – Tangerang-Bekasi).

1.5             Structure of the Thesis

This study will be divided into five main chapters, namely:

Chapter 1: Introduction

Introductory chapter consists of background, the formulation of the research problem, research objectives, the benefits of research, the scope of research and systematic study.

Chapter 2: Basis Theory

In this chapter will discuss and elaborate on the results of the review of the research literature or secondary data from a series of theories that can be used to support this research.

Chapter 3: Research Methodology

This section provides a description of the methodology used in this study, which includes study design, definitions and operationalization of research variables, data collection methods, population and samples, sampling methods and data processing, research models, research hypothesis, data collection techniques, research instruments, and the timing of data collections.

Chapter 4: Data Processing

This chapter contains the processing and analysis of primary data that has been collected in order to obtain research results that will answer the research objectives.

Chapter 5: Conclusions and Recommendations

At the end, this chapter will contain the conclusions of the research, limitations of the study, suggestions and inputs related to this study to the relevant parties.

2. LITERATURE SURVEY

2.1 Structure of the Thesis

There is a definition that distinguishes between micro, small and medium enterprises (SMEs) to large enterprises. This definition is based on several things such as the amount of assets, sales turnover per year, and the number of workers from several sources. Beside that explanation of the characteristics that make SMEs differ from large enterprises, and matters that could affect the success or failure of SMEs.

2.1.1        Definition of SMEs

Small and medium enterprises (SMEs) by Carson (1995) generally characterized by the limited scale of their operations aspect. Ramanathan et al. (2012) revealed SMEs play an important role in the economic development in many countries around the world. The existence of SMEs in many countries are unique in the extend that each country has their own provision in defining SME. In general, the Organization for Economic Corporation and Development (OECD, 2005) explains that the SME is an enterprise with the number of employees less than 250 employees. Nevertheless, according to Pham et al (2011) SME located in Vietnam should have fewer than 300 employees, less than 500 employees in Germany and less than 100 employees to Belgium. Some definitions of SMEs granted by institutions and other countries are:

Table 1 Definition of SMEs from several organizations and countries