Journal of Legal, Ethical and Regulatory Issues (Print ISSN: 1544-0036; Online ISSN: 1544-0044)

Research Article: 2022 Vol: 25 Issue: 4S

SMEs using social media for marketing and sustainable business in covid-19 era: A case study on SMEs creative industries in west java, Indonesia

Sri Hartati, Padjajaran University

Engkus Kuswarno, Padjajaran University

Purwanti Hadiisiwi, Padjajaran University. Jatinangor

Funny Mustikasari Elita, Padjajaran University

Citation Information: Hartati, S., Kuswarno , E., Hadiisiwi, P., & Elita, F. M. (2022). SMEs Using social media for marketing and sustainable business in covid-19 era: A case study on SMEs creative industries in west java, Indonesia. Journal of Legal, Ethical and Regulatory Issues, 25(S4), 1-10.

Abstract

This work aims to examine how SMEs utilize social media in the COVID-19 pandemic and the impact on business sustainability. The use of social media as a marketing medium has increased along with changes in consumer behaviour in purchasing various needs due to social distancing and physical distancing imposed by the government to avoid the sprawl of COVID-19. The data of this case study on SMEs in the creative industries in West Java, Indonesia, were analysed using a qualitative method. The data collection was conducted by in-depth interviews with SMEs actors, observation and literature study. The results showed that 90% of SMEs use social media in marketing. The social media are Instagram, Facebook and WhatsApp and e-commerce (Tokopedia, Bukalapak, Shopee and Lazada). They use social media because it is easy to use, low-cost and can reach a broader range of consumers. The cost spent for social media during the pandemic is 1 million rupiahs per month, with a profit rate of 20%. It is concluded that social media has helped SMEs optimize marketing and can help SMEs in maintaining their business sustainability during the COVID-19 pandemic

Keywords

Social Media Marketing, Business, Small Medium Enterprises, Sustainability, Covid-19

Introduction

The COVID-19 spreading throughout the country has disrupted all life activities. Disrupted activities are ranging from health, social and global economic (Sułkowski, 2020). Several countries have reduced business activities to slow down the pandemic and decrease human-to-human COVID-19 transmission. During this pandemic, different countries have adopted different measures for handling their domestic economic conditions, especially micro, Small and Medium Enterprises (SMEs). The Indonesian government undertakes health care and continues to strive to revive the affected economic sector. The government follows the principle that the opening of the economic sector in the Covid-19 pandemic should always be guided by health protocols and other related provisions to prevent transmission (KPCPEN 2020).

The Outbreak has consequences for the severe economic and dramatic changes in consumers’ behaviour and how businesses act. Donthu and Gustafsson (2020) reported the changes in industry sectors, such as consumer behaviour and businesses, and ethical issues. Furthermore, Shafi et al. (2020) reported that the pandemic had already brought a huge decline in demand in all business sectors. The SMEs in creative industries is one of the fast-growing industries globally and impacted by the pandemic. In Indonesia, fashion, skincare and cosmetic and culinary business contribute to 75% of the creative economy turnover and absorb around 80% of the job in the Indonesian creative economy (Ministry of Cooperative and Micro and Small Business, 2019).

Indonesia, as a developing country, has been impacted in two aspects: the external and internal. The external aspect includes the prices of raw materials, demand for exports, tourism, employment, international remittances, and external financing. Meanwhile, the internal aspect is a lower investment and capital accumulation in the long term, evident in the dynamics of economic activity. SMEs are a type of business experiencing problems during the COVID-19 pandemic. The constraints started from the supply of raw materials, production processes, labor to marketing.

SMEs are the foundation of the national economy globally, providing creators of new markets and sources of innovation and the largest employers. Similarly, in the case of Indonesia, SMEs are crucial for the economy as they contribute 61% to the GDP, with over 15% to export earnings (Ministry of Finacial, 2018). These businesses represent a significant portion of the manufacturing, retail, agriculture, wholesale, trade, and service sectors.

Social media has a pivotal role in achieving marketing and branding goals for business competitiveness. Recently, due to the changing market environment due to pandemic covid-19, it can be said that the sustainability of SMEs in developing countries, such as Indonesia, depends on social media. Social media is regarded as a resource that is likely to improve organizational skills and business achievement (Smits et al., 2013). Kietzmann et al. (2011) suggested that social media consists of seven functional resources, including interactions and partnerships. The use of marketing strategy not only enables the firm to consider critical choices concerning marketing activities but also to communicate and exchange resources between firms and customers (Varadarajan 2010).

In the last few years, information technology has developed rapidly. A platform enabling people worldwide to connect, called social media, was found (Li et al. 2020). Therefore, the use of social media platforms by firms is useful to expand geographic reach to buyers, build closer connections with customers, and bolster brand evaluations (Gao et al., 2018; Rapp et al., 2013; Naylor et al. 2012). Facebook and Twitter are the two pieces of social media that have experienced the fastest growth and have the most members to date. These social media have begun to be widely used to promote a product and are used as business strategies by several business people. Internet usage in Indonesia keeps increasing every year, and Facebook, Instagram, and YouTube are the three most frequently visit social media. Social media has essential roles in online marketing, such as promising branding and advertisement (Rahadi & Zanial, 2017).

Hence, the purpose of this case study is to explain insights on what drives SMEs to use social media and what technology has been chosen to respond to the pandemic and how the selected social media can affect business sustainability.

Methodology

This section provides details about the research methodology, including data collection and data analysis methods, in our case study.

Sample Description

SMEs are enterprises with annual sales below 150 million SMEs are companies with annual sales under 150 million per year. Furthermore, concerning SMEs creative distribution, most sectors represented in the case study are retail and wholesale, fashion, culinary, and consumer goods manufacturing. Additionally, The participating SMEs reported that they have up to 20 daily wagers. Thus, the majority of employees have been affected by the COVID-19 Outbreak.

Qualitative Study

This qualitative study was referred to the method described by Creswell (2013), a method used to simplify a vast field of research into a researchable topic by collecting and analyzing numerical data. This study employed semi-structured interviews to obtain data. Interviews are the most commonly used data source in a case study (Sharan 1998). Fourteen respondents from eight SMEs in creative industries participated in this study, enabling adequate information to understand the phenomena examined. The data were collected from February 09, 2020, to October 21, 2020, through either the owners of SMEs or ones working on managerial positions. However, amid the COVID-19 Outbreak and lockdowns, data collection was conducted through an online questionnaire.

Surveys on SMEs Impact

The sample was selected in two ways: (1) the SMEs involving in an association, (2) the SMEs being actively engaged in taking surveys. The proof of the COVID-19 crisis effect on SMEs in creative industries was obtained from 5,511 responses between February 09 and October 21, 2020. The survey consisted of 43 questions, with the basic information about the current response to the COVID-19 crisis, beliefs about the future course of the crisis, and these SMEs behaviour and survival as the crisis unfolds.

Analysis Description

Data analysis was undertaken applying the descriptive analysis approach. We adopted an analysis description, combining extensive literature review (policy documents, reports in the relevant field and, research papers) and the questionnaire results. In addition, this study analyzed how SMEs used social media platforms on marketing and business to achieve their goals.

Result and Discussion

The main questionnaire results are grouped into three categories. First, we describe the impact of COVID-19 on the business operations of SMEs toward the beginning of the crisis, second, the social media marketing strategy to achieve marketing and branding goals for business competitive, and third, their expectations about the sustainability business of the SMEs.

Impact of Crisis for SMEs during the COVID-19 Pandemic and Lockdown

The survey results indicate the COVID-19 crisis has caused severe disruptions and concerns among small businesses. Table 1 presents the impact of COVID-19 on 10 SMEs in Creative industries in West Java.

Table 1
Surveys on the Business Scale on the Impact of Covid-19 on SMEs
Business Scale Impact on Business Expectations
Microbusiness 70% of SMEs have not resumed operations yet A third is losing the business in one month, another a third in two months.
1/3 anticipated a negative or very negative impact n.a
75% directly affected a capital stimulus to help them survive
1/3 of SMEs experience rising costs and declining sales 25% already encounter cash flow problems
70% faces supply chain disruptions, 80% faces the impact of the crisis 25% already encounter cash flow problems
Small Business 69% experience a severe cash flow issue A third is afraid of losing the business in one month.
50% drop in sales 25% believes not to survive longer than one month
63% have been affected 45% is fear of losing the business in three months, 75% in six months
Middle Business 30% of SMEs believe in firing 50% of their staff 50% of SMEs have cash reserved for a month or less
78% reported declining sales, 53% of middle business believes to close if the lockdown continues
63% experienced a drop in turnover by on average 55% Half of SMEs have only two months  liquidity reserve

Table 1 reveals that more than half of SMEs experience serious losses. A third of SMEs are worried about losing the business if they do not get support within one month or within three for nearly the other half. The extent of SME concerns is reported in an article presenting the survey results involving more than 5,800 small businesses in the United States (Bartik et al., 2020). They reported major effects of the pandemic on small businesses. Furthermore, businesses downsized their employees by 40% on average. In addition, in this study, three-quarters of participants said that they have two months or less saving in cash. Similarly, Saturwa et al. (2021) reported that 1.25 per cent of MSMEs in Indonesia had had a decreasing sales turnover. Furthermore, the industries experiencing the highest labour decline, with average business cash flow resilience of 1.5-2 months, are retail and food and beverage.

The survey results in Table 1 reports the rising concerns among SMEs, and nearly half of them (47%) hope for better revenues in 2021. The survey also reveals that more than 71% of small businesses believe that the chance for their firms to be better and stronger post-pandemic. However, the latest survey (October 2020) showed that almost 90% of small businesses encountered a strong (51%) or moderate (38%) negative effect of the pandemic; 45% of faced disruptions in supply chains; 25% had less than 1-2 months saving cash.

Based on the scale business of SMEs, micro firms are the ones with the best financial resilience compared to medium and small firms affected by the COVID-19 pandemic. They also conducted relatively lower employee downsizing. MSMEs hope that the government provides a capital stimulus for them to survive the COVID-19 pandemic. A policy implication is that government assistance would be pivotal to maintain small and medium-sized businesses, especially those sectors closed due to the lockdown, such as trade, food, accommodation, and recreation. Unfortunately, several surveys in some countries (McKinsey 2020) indicated that around 25% to 36% of small businesses could close forever owing to the disruption in the first four months of the pandemic. They (71% of small businesses) expect they can return stronger after COVID-19.

Our findings are in line with SMEs in creative industries in other countries (Beglaryan & Shakhmuradyan, 2020; Baldwin & di Mauro, 2020; Barrero et al., 2020; Barua, 2020; Coibion et al., 2020; Reeves et al., 2020; Sidiq, Sofro, Jalil & Achmad, 2021)), suggesting that the crisis has hit these businesses harder, reducing more wages and employment compared to large companies.

Development of SMEs in Covid-19 Pandemic

Many MSME actors have laid off their employees and even temporarily closed their businesses. One of the reasons is the decrease in sales turnover. Work from home (WFH) also affects the decline in turnover. MSME actors experienced a drastic decrease in income due to the implementation of physical distancing and the implementation of Large-Scale Social Restrictions (known as PSBB). Restrictions on community activities influence business activities, ultimately affecting the economy.

In this section, we elaborate on the classification criteria of SMEs into different groups and provide an analysis of their content. Based on the three criteria, we can classify three MSME, representing the legality of the business, the form of business and asset ownership (Table 1).

Table 2
Characteristics of Business Scale Based SMEs In West Java, Indonesia
Business Scales Characteristics
Microbusiness Types of goods/commodities are not fixed at any time; they are subject to change.
The place of business is not fixed; it can move.
It has not done financial administration and does not separate personal and business finance. The entrepreneurs do not have the adequate entrepreneurial spirit, have a low educational level, do not have access to banking or only to non-bank financial institutions (NBFIs), and do not have business licenses.
Small Business Goods/commodities are generally fixed and not easily changed. The place of business is generally fixed. Although it is simple, the business has carried out financial administration, begun to separate personal and business finance, and made a business balance. The owner already has entrepreneurial insight and experience and has access to banks and NBFIs but has not managed it with good management.
Middle Business The business has good management and organization, with a clear division of tasks, including the finance department, marketing department and production division. It has carried out financial management by regularly implementing an accounting system to make auditing and banking assessments easier. It has carried out organizational and employee management rules and already had access to banking. It also has trained its human resources.

Indonesian domestic economic activities are mainly covered by MSMEs, although the ratio of MSMEs to Large Enterprises (LEs) differs across economic sectors, which is more vulnerable to developments in the country's situation. The official time series data of 1997–2017, released by the Ministry of Cooperative and SME, reported the number of MSMEs in Indonesia increased about 99.8% per year in 1997 to more than 59 million units by 2017 (or 99.9%), except in 1998. However, when the Covid-19 pandemic hits Indonesia, the number of MSMEs decreased by more than 7%. Like other developing countries, most MSEs in Indonesia are in retail trade, handicrafts, footwear, car and motorcycle reparation and maintenance, food and beverages, tobacco, and textile/garments.

The Covid-19 pandemic has hindered the development of MSMEs globally, including in Indonesia. These pandemic circumstances may vary across regions, sectors, or individual enterprises within a sector. Yet, the effects of the pandemic are similar to all MSMEs, including limited access to capital, business information, technology, and skilled workers; and challenges in marketing. The finding is supported by various studies on SMEs in other countries, showing that the effects of the COVID-19 pandemic are limited access to marketing and the limited technologies and skilled workers (Oyelana & Adu, 2015; Santos & Moustafa, 2016; Prawira et al., 2021).

Data from this study based on SMEs samples reveals that SMEs are mostly located in West Java, the centre of economic and financial activities in Indonesia with a dense population. In the Covid-19 pandemic, the SMEs recorded the number of customers and sales volume decreased sharply due to the community’s anxiety and the lockdown and restriction policies by the government. During this challenging time, SMEs must maintain the flows of goods and services and retain the public confidence of other business owners and communities to overcome the negative effect of the crisis. The SMEs has created a crisis management plan and strategy, but the focus is narrow because of the resource scarcity and lack of a sense in crisis planning. Furthermore, the SMEs has also prepared a contingency plan, like buying from several suppliers and diversifying their products. During the large-scale social restriction, they have decreased the operation hours, non-essential operation costs, and inventories. They also massively advertised their products on social media and offered an extra 15% discount.

Furthermore, this study shows that SMEs in rural areas or rather isolated areas from cities have more constraints, especially internet access, to stay in their business. In the case of the Covid-19 pandemic with lockdown policies by the government, previous studies conducted in several countries suggest that many micro or small businesses owners are ‘pushed’ instead of ‘pulled’ to earn more income or to support their family incomes ( Das & Mohiuddin, 2015; Shah & Saurabh, 2015; Santos & Moustafa, 2016).

Responses to the COVID-19 Pandemic and Lockdown

At the beginning of the crisis, the COVID-19 affected business operations and employment. Next, in the middle of the crisis, around October 2020, it hit the financial fragility of those businesses. At this time, various strategies are necessary to overcome the COVID-19 pandemic and lockdown and understand the impact of future policies. Small businesses are prone to crises, like the pandemic. The crisis due to COVID-19 can harm the business of SMEs, especially those creative industries in West Java. This study results found that the SMEs experienced crisis management during the COVID-19 Outbreak.

In response to the pandemic, 54.5 per cent of SMEs reported that they were temporarily closed. Meanwhile, 5.8 per cent said that they were permanently closed. In contrast, only 39.7 per cent reported that they were operating. Over the samples, the number of full-time employees had declined by 35 per cent between February 31 and late May 2020, and part-time employees were 65 per cent lower than at the end of February. Overall, employment declined significantly, decreased by 39 per cent from February. Fifty-four per cent of SMEs in West Java were closed in late-March/early-April, and employment had reduced by 32 per cent. These results cover the SMEs temporarily closed. If we only consider the running businesses, the number of total full-time employees has fallen by 17.3 per cent, and part-time employees declined by 34 per cent. These figures are also comparable to other emerging data points.

Smaller SMEs, those with less than 20 employees in January, tended to close. SMEs with more 25 employees, from March to April 2020, had the biggest job reduction. Among SMEs in creative industries, retail and service businesses had been down drastically. Unlike large firms, SMEs primarily depend on external financial resources (Beck & Demirguc-Kunt, 2006). Thus, small businesses are more susceptible to financial difficulties resulted from falling demand (Cowling et al., 2015). Concerning the financial aspect, about one-fourth of SMEs have saving cash less than the expenses for two months. Around one-half of firms had enough cash to spend between one and two months. Furthermore, Moreira (2016) confirmed that the widened credit accessibility positively contributes to the growth of SMEs. Similarly, Hernández-Trillo et al. (2005) suggested that formal financial sources tend to invest in more efficient businesses instead of the informal instruments, leading to a screening and monitoring function for micro-enterprise.

Social Media Marketing Strategy by SMEs

The current main problem for SMEs actors is that all MSME actors are affected by the economy, declining in sales and demand for goods or services. In the digital era, social media has now become a trend in marketing communications. Social media is an online medium where users can easily participate, share, and create content, including blogs, social networks, wikis, forums and virtual worlds. Blogs, social networks, and wikis are the most common social media used by people worldwide.

One of the current strategies for marketing products is to utilize social media so that the product or service advertisement reaches a broader public as social media is the most accessible platform for everyone in this COVID-19 pandemic. In addition, social media can easily be accessed by all groups of age. Thus, conducting more effective promotions on social media will increase marketing even though the sales promotion results have not increased significantly considering the relatively short application period. MSME actors use diverse social media, such as Facebook and Instagram. If you look at the graph, the SMEs actors use Facebook more often because it is easy for some MSME actors.

Forty-two per cent of SMEs in creative industries in West Java use social media or digital platforms to survive and continue to do their business to cope with the impact of COVID-19. However, currently, only about 420,000 West Java MSME actors have gone digital (West Java Cooperatives and Small Business Office 2019), or only 16 per cent of the number of MSMEs, which reached 4.2 million. However, this figure increased by three per cent compared to before the Covid-19 pandemic, which only reached 13 per cent. Furthermore, the study results show that SME owners are using more digital devices than those who are new to them. In detail, 51% of respondents said they increased sales through e-commerce platforms, 50% increased the use of video streaming, 49% increased online training, and 45% sold more actively on e-commerce platforms. In addition, around 70% of respondents admit that they will continue to use digital media through e-commerce to sale the product as well as social media.

Kaplan and Haenlein (2010) suggested that in a marketing context, social media is a platform where people establish a connection and share information or sentiments. The marketing strategy is a set of resolution the firm use to create critical choice, communicate, and convey value to customers (Varadaraja (2010). Yadav et al. (2013) argued that social strategy is the exchange-related activities affected by an individual’s social connection in digital social environments. Further, social commerce strategy is social media use for the initial contact and with the ultimate objective is to sell (Rydén et al., 2015).

Social media has caused fundamental shifts in the marketplace. Kaplan and Haenlein (2010) reported that firms and customers are connected by various platforms, such as Facebook, Twitter, and YouTube. Most SMEs use social media to make personal contact with consumers, promote/advertise, note consumer needs and respond to consumers. Social media is a communication tool for SMEs to enhance market share and assist business-related decision-making. Based on this study results, WhatsApp, Facebook, Twitter and Instagram are the most commonly used social media. For most SMEs, using social media is beneficial to communicate, discuss, and respond to consumers, market and advertise products, obtain data on consumer needs, and assist decision-making.

In addition, SMEs also sell their products in the marketplace. Considerations of SMEs using the marketplace, among others, are to give consumers confidence that their company can be trusted. Based on a survey conducted on SMEs in creative industries in West Java, such as in Bekasi, Tangerang, Bogor and Bandung, it was found that 82 per cent of MSME respondents used Shopee as a place to sell and market their products. Sixty-four per cent of respondents sell and market products on Tokopedia, 28 per cent on Bukalapak, 22 per cent on Lazada, 15 per cent on Blibli and 9 per cent on others. Meanwhile, the survey results also noted that 92 per cent of respondents chose the Shopee platform as it provides the highest sense of security, followed by Tokopedia (72%), Bukalapak (35%), Lazada (36%) and Blibli (40%).

The entrepreneurs choose to sell on the marketplace for several reasons, 54% of MSMEs said they could save promotion costs in the marketplace, 48% mentioned they benefited from the increased turnover, 29% said it was more competitive than offline, and 19% believed it allows them easy access to the export market. Some business owners combine offline and online sales, and others even close their offline and fully switch to online businesses.

In the Covid-19 pandemic, the presence of digital platforms answers consumer demands, with the regulations requiring consumers to limit travelling, stay at home, and keep their distance. On the other hand, MSMEs are aware of the trend of consumers switching to digital shopping. Therefore, the marketplace has finally become a reliable place to bring together MSMEs and consumers. Harmeling et al. (2017) argued that changes in SMEs marketing strategy are anchored on customer engagement theory that enables the firm to make critical judgement and decisions based on marketing activities in certain markets and segments, deliver value to customers to achieve its particular financial goal. “Social media" is also called “social ties”, not only used for the interaction needs and social media in cyberspace but also business activities. SMEs use social media because it is more efficient, user-friendly and .relatively cheap. During a pandemic, media is a solution for SMEs to expand the domestic market overseas with low costs and unlimited operating hours.

Conclusion

The business surveys concerning the COVID-19 crisis impacts on SMEs indicates severe disruptions and concerns among small businesses. Many SMEs actors have laid off their employees and even temporarily closed their businesses. The main problem for SME actors is that currently, all MSME actors are affected by the economy; they experience a decline in sales and demand for goods or services from consumers. Due to the pandemic, 54.5 per cent of SMEs reported that they were temporarily closed, and 5.8 per cent said they were permanently closed. One of the strategies in product marketing during the current pandemic is to utilize social media to broaden product or service promotions. This research shows that the use of social media by SMEs rises during the pandemic. In detail, 51% of respondents said they increased sales through e-commerce platforms, 50% use video streaming, 49% conduct online training, and 45% sell more actively on e-commerce platforms. Finally, SMEs uses social media as a bridge to convey and promote their business. Increasing the use of social media as a means of marketing does not necessarily increase the sales of SMEs products. However, social media is one of the sales model solutions for SMEs to survive and overcome various limitations. Also, the choice of social media is critical to building continuous communication with consumers.

Acknowledgement

This paper is part of dissertation research. We would like to thank Institute Technology Bandung for the funding and support.

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Received: 05-Feb-2022, Manuscript No. JLERI-21-11260; Editor assigned: 08-Feb-2022, PreQC No. JLERI-21-11260 (PQ); Reviewed: 21- Feb-2022, QC No. JLERI-21-11260; Revised: 08-Mar-2022, Manuscript No. JLERI-21-11260 (R); Published: 17-Mar-2022.

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