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Impact of Social Media on Entrepreneurship and Entrepreneurial Performance: Special Reference to Small and Medium Scale Enterprises Ashwini Kadam and Shalaka Ayarekar Ashwini Kadam is Assistant Professor,Department of Business Management, Padmashree Dr. D. Y.Patil University. [email protected] Shalaka Ayarekar is Assistant Professor, Department of Business Management, Padmashree Dr. D. Y. Patil University.
Abstract Small & Medium Enterprises (SMEs) have emerged as a dynamic and vibrant sector of the Indian economy. Information Technology is playing a vital role in enhancing the productivity and competitiveness of SMEs. Dynamic Business environment has brought severe competition among SMEs, therefore owners are required to interact vigorously with internal and external members. Social media is a phenomenon that has transformed the interaction and communication of individuals throughout the world. In recent times, social media has impacted many aspects of human communication. This study focuses on the impact of social media on entrepreneurship and entrepreneurial performance.
Keywords Small and Medium Enterprises (SMEs), Social Media, Entrepreneurship, Entrepreneurial performance, Productivity, competitiveness.
Introduction
Small and medium enterprises (SMEs) confront fierce competition and continuously changing business environment. To be successful and effectively compete in such an environment, SMEs must equip themselves appropriately to meet any challenges. One of the emerging big challenges facing these enterprises is how to appropriately incorporate and harness the mass collaboration that social media facilitate into their own business strategy.
In recent years, social media as it is seen in the form of Facebook, YouTube, eBay, Twitter, and others has exploded as a form of interactive communication. Equipped by the advancement in technology, social media has changed the delivery, structure and availability of information, putting the once capital-intensive role of broadcasting within the reach of individuals. This has given immense power to consumers and transformed individuals around the world from passive recipients of information and products into active creators of content (information and ideas) who are able to actively and immediately communicate with one another with the help of social media.
The phrase social media means, however, different things to different people. In the literature social media and Web 2.0 are terms
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often used interchangeably (Askool & Nakata, 2011; Constantinides & Fountain, 2008), even though they are not entirely the same. The term Web 2.0 was first introduced by O’Reilly (2005; Askool & Nakata, 2011), and although many definitions of it have emerged since then, the term has not yet enjoyed a unanimously accepted academic definition (Constantinides & Fountain, 2008).
Constantinides and Fountain (2008) have found out the following major categories of Social Media: blogs, social networks, content communities, forums and bulletin boards, and content aggregators. Kotler, Kartajaya, and Setiawan (2010) pointed out as Social Media becomes more expressive, consumers are unreservedly sharing their experiences and opinions, which are becoming increasingly influential on other consumers’ choices and preferences. The Social Media tool fosters an environment where consumers form strong relationships in which the parties influence each other’s views, attitudes, knowledge, information gathering, purchasing behaviour, and post purchase assessments (Constantinides & Fountain, 2008; Mangold & Faulds, 2009).
In 2000 there was a boom in social media with the spring up of many social networking sites. This highly boosted and transformed the interaction of individuals and entrepreneurs who share common interest. For entrepreneurs, social media is already becoming an essential tool for keeping in touch with their suppliers, customers and contacts, recruiting employees, and promoting their profile and brand. In this respect, and as it pertains to business strategies, social media provides entrepreneurs with an opportunity to collaborate and share knowledge with their network, thus developing and creating new adaptive more successful business
strategies. For SMEs without the resources to explore conventional advertising options, social media like Twitter presents a free and efficient alternative to promote goods and services directly to customers, exploiting the immediacy and intimacy that other channels simply can’t match. Examination of the manners in which companies can take advantage of emerging social media technologies, Li and Bernhoff (2008), writes that entrepreneurs who make use of social media networks are more likely to achieve greater success than those who do not.
Social Media helps conversations to reach a worldwide audience leveraging the “long tail” concept, which means conversations that can be conveyed to different forums. There are several communication channels in an organization that include meetings, phone calls, and emails. These communication channels have their own limitations such as forgetting a message, missing to take notes during a meeting, and searching for information in a huge list of emails which can be challenging. Use of Social Media web sites has increased the channels of communication and its effectiveness in the organization. Now people need not waste their time as it has become easy for a person to send messages through an instant messenger or a tweet and get the response really quick. Social Media has also improved collaboration between team members in an organization, which has resulted in a better outcome. When a team is encouraged to work as a team allowing them to share their workload, the outcome will be tremendous compared to what an individual could have created. At such situations, the Social Media acts as a source to allow people to generate and share their ideas. Through communication and collaboration, one can increase the overall effectiveness of a team. Companies must allow
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their employees to leverage their networks if they have a well-built Social profile. This will result in professional gains as these Social Media will enable collaborating without leaders in their respective industries. Moreover, this will help the employees stay up to date with the latest developments in the industry and also stay connected with the top leaders.
Benefits of Social Media to Entrepreneurs
“The elevator pitch about these “intangible” or long term benefits of Social Media is very simple”(Hollier, 2009). Engaging in Social Media will help strengthen the brand experience which will support brand building. A company becomes more attractive to the customers, and to current and potential employees, if it has a well-built brand name. As a result, Social Media will help in building a good reputation for a entrepreneurs. A couple of words can describe a brand whether in the consumer or in the business space. By building a brand, it helps to reinforce the brand in the minds of the consumers. Through Social Media, the company can repeatedly reinforce the brand name. Customers experience a brand privilege while using a product or service and also when interacting with a company (Carraher, Parnell, Carraher, Carraher, & Sullivan, 2006). Brand awareness starts with the experiences of the employees of a company. If a company is approachable, people-friendly, then the company must make itself visible by inclusion on the web (Carraher, Parnell, & Spillan, 2009). Social Media forum acts as a powerful way to communicate the brand value and brand attribute as they facilitate open forms of communication. Social Media is best for the following situations:
y Promote open communication between employees and management. y Enable employees to share project ideas
and work in teams effectively, which help in sharing knowledge and experiences. y Social Media also promotes better content,
such as webcast and videos, than just simple text. y Helps to communicate collaboratively
between current and potential customers, in receiving feedback, product definition, product development, or any forms of customer service and support. y Encourage members, or part of the
company’s employees, to become members of a well recognized community. y Social Media becomes a good venue for
discussions and becomes a classic goal of marketing and communications, but the companies must ensure that the employees are adhering to the rules and etiquettes of Social Media.
Social Media such as Facebook, blogs, and YouTube have become major sources of hiring. Linkedln is another similar source used by recruiters, and about 80 percent of companies use it for the recruiting process. Social Media has also become one of the easiest ways to improve productivity and to generate a natural interest in the work carried out by the employees. Using these Media, companies can track employee’s creativity and enthusiasm.
Social Media, Entrepreneurship and Entrepreneurial Performance Entrepreneurship enables enterprises to successfully develop products and new markets, and thus increase their competitiveness so that they can achieve excellent performance (Prahalad and Hamel 1994). Social Media helps
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a lot in this regard. In a complex and fluctuating environment, companies must have more entrepreneurship in order to find additional opportunities and thus maintain a high performance output (Hayton 2005). Birkinshaw (2000) pointed out that entrepreneurship is a function that refers to the creative method of the entrepreneur, which includes the development of new products and services, establishment of the supply chain, and new integration of the overall productivity.
Literature Review
The whole essence of this research was to get an understanding of Impact of Social Media on Entrepreneurship and Entrepreneurial Performance: Special Reference to Small and Medium Scale Enterprises. The argument that Social Media are a factor that can beneficially influence entrepreneurial performance has been given considerable attention in the literature. In order to get complete understanding of the theory and practice, various studies were analyzed and reviewed.
y Sheetal Thapar and Navneet Sharma (2013) in their study on role of social networking sites in some key cases throws a light on the growing popularity of social networking sites. The study showed that people have got their own media to raise their voice and stand for their rights. Author thinks that Social Media possess the character of true democratization of information. Study concludes that the participatory nature of Social Networking Sites cuts through caste and class barriers. y Ambrose Jagongo, Catherine Kinyua
(2013) in their study The Social Media and Entrepreneurship Growth focused on the effect of social media on the growth of SMEs
in Nairobi. The study established that social media tools offer greater market accessibility and CRM which in turn have a significant impact on the growth of SMEs. This study recommends that the policy makers should come up with favourable internet surfing rates and e-business policies to encourage the technological adoption that would grow the SME industry. y Venkatesh, R(2013), examines the
possibilities of different sections of society following different trends of communication. This study talks about the usage of product promotion on social media, by the multinational companies in India especially in the FMCG sector. y Sharma & Kalra (2011) opined that social
media is released in two types of forms written or textual. These forms of social media are typically found on blogs, web forums, email discussion lists, message boards and consumer reviews and complaint sites, Photographs are displayed as images on Flicker or other image sharing sites, audio broadcasts are created as podcasts and consumers who create video clips can upload them on YouTube or other video sharing sites. Social media has been modernized to reach consumers through the internet. Study concluded that Social Media has become appealing to big and small businesses and it has the ability to reach more consumers worldwide. y Edosomwan, Simeon; Prakasan,
Sitalaskshmi Kalangot; Kouame, Doriane; Watson, Jonelle; Seymour, Tom(2011) highlighted on History of Social Media and its impact on Business. In this article, the authors describe features and the evolution of social media, including major social networking sites that came
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into existence during the 21st century. Some of the sites discussed include Facebook, YouTube, Twitter, MySpace, CyWorld, and LunarStorm. y Robinson, Sherry (2010) throws a light
on Informal Social Networks formed by Industries. This study builds upon previous work on social networks in entrepreneurship by examining the sources of advice used by successful business owners in three industry sectors (services, construction, and “other industry”) in six European countries. y W. Glynn Mangold, David J. Faulds(2009),
says that with the help of internet based social media one person can communicate with thousands of other people about products, services and the companies which provide them. Study emphasises that social media is a hybrid element of the promotion mix because in a traditional sense it enables companies to talk to their customers, while in a non- traditional sense it enables customers to talk directly to one another. y Li and Bernhoff (2008) consider the
importance of online Social Networks in their analysis. According to their argument, changes in online behavior have created a social trend in which people are using technologies to get the things they need from each other, rather than from traditional institutions like corporations. They refer to this social trend as the ‘Groundswell’. In this respect the ‘Groundswell’ has changed the balance of power in such a way that individuals are now shaping the economy by increasingly relying on themselves to produce, market, and distribute products just like traditional corporations did in the past. Furthermore, this argument suggests that this ‘Groundswell’ is an unstoppable trend which threatens the success
of those businesses which do not incorporate it as a part of their business strategy. y Brudel and Preisendorfer (1998) suggest
that large personal Social Networks stimulate the entrepreneurial success of its participants by providing access to more reliable and exclusive information. Further, a diverse network give access to a diversity of customers and suppliers as friends and acquaintances help to spread the information through their own personal networks. This argument is echoed by Dubini and Aldrich (1991), who propose that entrepreneurs can increase their span of action through diverse personal networks and acquire support and resources that would be otherwise unavailable.
Research Objectives
The following are the objectives of present study: 1. To determine level of understanding of
Social Media in SMEs. 2. To determine level of awareness of Social
Media in SMEs. 3. To determine impact of Social Media on
Entrepreneurship and Entrepreneurial performance.
Research Methodology
This study used both quantitative and qualitative techniques of data collection. The primary data was collected through quantitative survey. In view of the objective of the study, it was considered necessary to undertake a survey of SMEs from major parts of Mumbai and Navi Mumbai. To achieve the objectives a sample of 100 small and medium scale enterprises from Mumbai and Navi Mumbai has been taken.
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The information has been collected from the respondents by using questionnaire. Sample has been randomly selected from sectors like Engineering, Electrical, Food Processing, Chemicals and Pharmaceuticals, apparel and furniture, IT Hardware and software, Travel and Tourism, Auto Components, retail outlets, Gems and Jewellery, Cosmetics, footwear, Real Estate etc.
Tools used for Data Collection A structured questionnaire was developed. The questionnaire was implemented on a 5 point Likert Scale (1=strongly agree & 5= strongly disagree). Questionnaire survey method was selected as the research instrument.
Data Analysis Impact of Social Media on entrepreneurial performance of Small and Medium Enterprises
Table 1: Level of Understanding of Social Media Tools in SMEs
Level of Understanding
No understanding 5% Poor understanding 12% Basic understanding 52% Good understanding 16% Excellent understanding 15%
Table 2: Level of Awareness of Social Media Tools in SMEs
Level of Awareness Social Networks 70% Blogs 18% RSS 7% Others 5%
Table 2 : Level of Awareness of Social Media Tools in SMEs
Social Networks
70%
Blogs 18%
RSS 7%
Others 5%
Social Networks Blogs RSS Others
Table 3: Impact of Social Media Tools on Entrepreneurship
Impact Huge Impact 52% Some Impact 22% Very little Impact 13% Can’t say 6% No Impact 7%
Table 3: Impact of Social Media Tools on Entrepreneurship
Huge Impact 52%
Some Impact 22%
Very little Impact
13%
Can’t say 6%
No Impact 7%
Huge Impact Some Impact Very little Impact Can’t say No Impact
16%
Table 1: Level of Understanding of Social Media Tools in SMEs
52%
16%
15%
12% 5%
Basic understanding Good understanding Excellent understanding Poor understanding No understanding
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Table 4: Impact of Social Media Tools on Entrepreneurial Performance of SMEs
Impact Huge Impact 28% Some Impact 51% Very little Impact 9% No Impact 5% Can’t Say 7%
Table 5: Analysis of effectiveness of Deliverables Social Media for the SME Sector Deliverables Social Accountability 52% Competitive Benchmarking 57% Quality Management 68% Engagement 74% Influence customer purchase decisions 55% Create Brand Awareness 89% Profitability 63% Develop initial level of trust 70% Sales 58%
Table 5 : Analysis of effectiveness of Social Media Deliverables for SMEs
Create Brand Awareness
14% Develop initial level of trust
12% Sale s 10%
Engagemen t 13%
Influence Custome r purchase decisions
9%
Profitability 11%
Social Accountability
9%
Benchmarking 10%
Quality Management
12%
Descriptive Analysis
1. From analysis of the data it was found that 70% SMEs are aware about the Social Networks, 18% are aware about Blogs, 7% are aware about RSS and 5% others.
2. From analysis of the data it was found that 52% SMEs have basic understanding, 16% have good understanding, 15% have excellent understanding, 12% have poor understanding and 5% have no understanding about Social Media Tools.
3. A clear majority of the respondents (52%) believed that Social media definitely has huge impact on entrepreneurship and 22% of the respondents believed that Social Media has some impact on entrepreneurship in the SMEs sector.
This is where SMEs initiatives and innovations can intervene to bring a gradual change of attitude and culture.
4. It was found that majority of the respondents (51%) believed that Social media definitely has some impact on entrepreneurial performance and 28% of the respondents believed that Social Media has huge impact on entrepreneurial performance in the SMEs sector.
5. The key deliverables that the social media can provide are Create Brand Awareness (89%), Develop initial level of trust (70%), Sales (58%), Engagement (74%), Influence customer purchase decisions (55%), Profitability(63%), Social Accountability (52%), Benchmarking (57%), Quality Management (68%). These key deliverables play a very important role in enhancing entrepreneurial performance.
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Research Findings
1. The major finding of the study is that most of the SMEs are aware about the Social Networks and they use Social media for keeping in touch with their suppliers, customers, for recruiting employees, and promoting their profile and brand. This has positive effect on productivity improvement and hence entrepreneurial performance.
2. Data analysis of this study supports a strong positive relationship between use of Social Media and entrepreneurial performance.
3. Data analysis reveals that most of the SMEs have basic understanding of Social Media and they are using it for not only generating sales but also engaging customers in interaction with the company.
4. Data analysis reveals that there is a substantial impact of the Social Media on both entrepreneurship and entrepreneurial performance of the SMEs.
5. The key deliverables that the social media can provide are Create Brand Awareness, Develop initial level of trust, Sales, Engagement, Influence customer purchase decisions, Profitability, Social Accountability, Benchmarking, Quality Management and these key deliverables play a very important role in enhancing entrepreneurial performance.
Conclusion
SMEs act as a vital component of growing economy and contribute positively in development of economy; creating employment for both urban and rural workforce. Social Media tools help Small and Medium scale
entrepreneurs to improve operational as well as entrepreneurial performance. Social Media tools have considerably influenced the purchase decision of consumers and therefore consumers have more power than ever before. There is a need for the SMEs to shape the conversation that is propagating via the social media network. The SMEs should focus more on employee engagement through social media which will in turn facilitate in knowing the customer’s demands and resolve grievances. Some SMEs are incorporating Social Media Tools in their business practices. Some of them are using LinkedIn for hiring employees etc. Most of the SMEs are merging Social Media tools with the company’s website for customers to post their views and feedback either positive or negative which creates ample opportunities and challenges for SMEs. With the help of Social Media tools SMEs can improve customer satisfaction, reduce negative publicity over the internet and cut costs. SMEs leverage its Social Media experiences to convert it into a high margin business model. In the competitive world these results may provide SMEs to maintain a competitive advantage by using Social Media tools.
References
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Impact of Social Media on Entrepreneurship and Entrepreneurial Performance: Special Reference to Small and Medium Scale Enterprises
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