Microbusiness in the Global Economy: Using the Internet for Idea Driven Commerce Dr Susan Dann and Dr Stephen

Dann Abstract The nature of the Internet as a global market place for ideas has seen a rise in the number of small, medium and microbusinesses that are taking advantage of these opportunities. As a part of this new wave of idea driven commerce, there has been a rapid increase in the number of niche orientated products being developed by microbusinesses operating without much of the traditional overheads of small business. This paper offers an examination of the role of the Internet in the rise of globally oriented, idea driven commerce, and the presents an alternative way of thinking of about how these microbusiness entrepreneurs are engaging in their product marketing. Microbusinesses have been able to use the street level marketing approach to assist in the development of goods and services for a psychographic niche of which the microbusinessperson is a member. Introduction This paper looks at the role of the Internet in facilitating global microbusiness success by maximising the advantages of delivering microbusiness idea-products through the Internet. It also examines the value of the business to microbusiness market from both the perspective of the microbusiness for channel control, and the commercial opportunities for the facilitator businesses. Facilitator businesses are described as those on-line organisations that offer business to business functions, such as printing and distribution, for idea products such as art, music or entertainment. This paper also briefly explores the role that street level marketing can play in aiding the global microbusiness.

Definitions Microbusinesses are defined as SME business operations consisting of five, or less, employees (Baldwin, 1999). For the most part, the microbusiness sector remains a largely hidden organisational structure, as it has previously been encompassed by SME definitions, which regarded businesses of between 1 and 100 employees as being of roughly equivalent nature. However, with the rise in the number of SOHO (small office, home office)

businesses, and the increasing focus on small operator e-commerce projects, the microbusiness is now a significant factor in global economics.

Characteristics of the Global E-Microbusiness For the purpose of this paper, a global e-microbusiness is defined as an Internet based, globally focused business organisation consisting of less than five employees. In order to qualify as globally focused, the microbusiness must either directly ship products to international markets, or make use of an international distribution mechanism, which allows for global access to their products (Dann and Dann, 2001b). For example, a microbusiness based in Los Angeles must make their product available to buyers beyond the American border in order to qualify as a global microbusiness (ie: if shipping restrictions to US Mainland only exist then it cannot be classified as global). However, an Asian microbusiness that uses a US based distribution service, shipping exclusively to the US mainland, does qualify as a global microbusiness. The distinguishing factor is the distribution of the product outside the country of origin of the microbusiness.

Nature and Structure of Idea Driven Microbusiness Given the nature of the Internet as a medium of idea exchanges, one of the most common aspects of e-microbusiness is the provision of idea driven e-commerce (IDE). Idea driven commerce has been used to describe those categories of products that are based on eliciting emotional responses from consumers – for example, art, graphical imagery, audiovisual or interactive experiences. For this paper, (IDE) will be limited to those products which are distributed through the Internet, and which are designed to elicit a cognitive-emotive response from an end consumer.

Microbusiness Outcomes: Idea Products and Services So what then are the most common forms of cognitive-emotive idea products that are distributed on the Internet? There are four main types of products that are best suited to the current conditions of the Internet, and these are digitised art, music, interactive software and web sites. Digitised art includes any artist or design work that can be viewed digitally, and is available for sale commercially as either a printed work or permanent assignment of digital reproduction rights. This limitation to the product removes any non-commercial artist work from consideration as part of the microbusiness portfolio. Similarly, the on-line distribution of music requires that the music be available for sale in a commercial form (either as licensed download, free sample of a commercially available album) to limit this application to those bands or musicians using the Internet as a distribution outlet for commercial gain. Interactive software includes those programs made available under commercial agreements, shareware arrangements or any public licence that does not exclude commercial revenue from the sale of the product. Finally, the microbusiness web sites are those web sites that provide content for the intent of commercial gain, either through the sale of support merchandises, direct subscription or advertising revenue. This paper is focused on digitised art and music services, thus interactive software or web sites fall beyond the scope of the study.

Factors in Global Microbusiness Success Despite such a variance in the type and nature of the global microbusiness, there are a series of common factors that increase the likelihood of success for these operations. Initially, as with businesses of any size, an e-microbusiness must have a business focus including the need for the use of marketing. In addition, global e-microbusinesses need to consider their distribution strategies for accessing their global target markets. For example, they may need to consider whether they are inside America looking outwards, or outside America using the

Internet to access the US market. Finally, the e-microbusiness operator needs to examine whether to use their own distribution mechanism, or to make use of an existing business to business distribution channel.

The Street Level Marketing Paradigm Street Level Marketing (SLM) is a new conceptualisation of small and medium enterprise marketing that represents those entrepreneurial marketers servicing the needs of their own niche-market community by delivering products that were developed within their community (Dann and Dann 2001a). It is a technique especially suited to the microbusiness community, as many exist to service smaller intra-niche markets. For example, a microbusiness could be founded around the development of a piece of software (e-mail client) to meet a specific niche need (multiple e-mail account handling) after the programmer could not find an existing product. In the broader microbusiness sense, SLM represents a movement away from the established belief that all marketing must be based on a top-down “research and discover target needs, then develop products to match the needs” approach used by larger organisations. Instead, this approach validates the marketing methods of the entrepreneurial marketer who focuses on developing products to service their own needs first, and then expands the application of this product to people with similar needs inside their market niche.

SLM Expanded SLM expands into a series of sub-elements which operationalise the concept, which are illustrated in Figure 1 (Dann and Dann 2001a).

Figure 1
Marketing Orientation

Components of Street Level Marketing
Market Immersion Credibility Aidmheil

Marketing Activities Marketing Philosophy Marketing Intelligence Marketing Research

Street Credibility Source Credibility

Self belief Product belief

The central tenet of SLM is the need to use the principles of marketing in the operation of the microbusiness. In this context, marketing is seen as the ability to recognise that the product was developed to solve a personal need, has a wider application in the community, and can be tailored to best suit the needs of the niche. The four elements of the marketing orientation include the need for the microbusiness to engage in marketing activities, use the marketing philosophy, gather marketing intelligence and engage in some forms of marketing research (Doyle and Wong 1998; Gray et al 1998). For a business that consists of five or less people, these tasks are usually handled as an informal part of the daily operations, in that a client focus can be easily maintained (marketing philosophy in action) when the members of the microbusiness are developing their product for their own needs. Similarly, marketing research in this context is both quantitative where necessary, but primarily reliant on secondary data or qualitative research. Customer feedback in microbusiness organisations is usually directed straight to the person responsible for implementing the suggested changes.

Market Immersion is the second element of the SLM technique. This formally recognises the involvement in the market niche as a criteria for success as an SLM business. Where a microbusiness is focused on delivering a product to a target market, their level of market immersion is critical in determining whether SLM is applicable. Those microbusinesses that

target external markets are not part of the SLM process, and must be examined under conventional marketing techniques. The value of market immersion for the microbusiness comes from inherent knowledge of the needs of the marketplace from personal experience, informal information networks and a marketplace reputation. Reputation within the niche also forms a part of the credibility of the product and microbusiness engaged in SLM.

Credibility splits between the source credibility theories of advertising and promotion, and the street credibility of the microbusiness (Garbino and Johnson 1999). Street credibility is the combination of personal and corporate reputation, perceived expertise, social network capital, market mavenism (Feick and Price 1987), target market empathy (Andreasen 1994, Walker Langmeyer and Langmeyer 1992) and peer group respect. The value of street credibility extends beyond the professional reputation of the microbusiness through to the personal reputations of the staff of the business, and their dealings with other members of the niche.

The final element of SLM for microbusinesses is the notion of aidmheil, which is the notion of faith in the product and self belief and belief in the potential success of the microbusiness. Faith in this context is not associated with a religious experience or belief structure (although it can help when running a microbusiness). Instead, this is a formal recognition of the need for a level of personal confidence in the product and a self confidence in the microbusiness’s ability to deliver on their promises (Flores 1998). Quite often this is reflected in the personal mission statements of microbusiness operators who express an inherent faith in their product, or a belief in their eventual success. The aidmheil of a microbusiness can also be represented through the owner-operator’s willingness to undertake the higher risks of small business operation and working for themselves instead of working for another organisation.

Gaining an Internet advantage for SLM Microbusinesses Having proposed that a microbusiness, using an intra-niched focused SLM tactics, can use the Internet for servicing a global market niche, how can these businesses gain the maximum effect from their on-line presence? Tetteh and Burn (2000) proposed a six point structure for maximising on-line effectiveness for SME marketing. These are: • Define clear goals for being on-line. For the e-microbusiness, an on-line presence should be established with a series of goals and objectives in mind for two reasons. First, clear goals are needed to plan the development of the microbusiness and its on-line presence. Second, set goals allowing for calculated strategies in developing on-line networks, business relationships and determining what infrastructure is needed to service the targeted global on-line niche. • Develop infrastructure that adds value to the business. Microbusinesses are restricted in the degree to which they can extend their organisational capacities before moving into the SME category, or losing sight of their core business. Microbusinesses are advised to only add those functions to the e-microbusiness that result in an increase in value – for example, a microbusiness that uses the Internet to conduct wholesale transactions with online retailers does not need to develop their own on-line retail outlet. • Incorporate and install networking features between stakeholders. For intra-niche targeted products, this can be as simple as creating a means of communication and exchange amongst niche market members through a discussion forum. Above all, the priority should be to create a network of value between all of the relevant stakeholders, such as the end users and the product manufacturer’s support staff (where the microbusiness is a retailer), or between the microbusiness’s product designer and the retailers. Microbusinesses based around entertainment products such as music or literature often

develop extensive networks between client-users (their fans) and client-distributors (live music venues / book stores). • Use the virtual infrastructure to create virtual values of process, product and image. Process values involve using the on-line infrastructure to give greater depth and detail to the on-line product – for example, a microbusiness that creates specialist wood souvenir carvings can contain additional information on the history of the art, links to further information, and even a discussion forum for other artists. This develops a sense of value for the customer in visiting the virtual infrastructure and encourages repeat visits. It also serves to enhance the reputation of the product through enhanced corporate image for the microbusiness. Virtual infrastructure can also be used as the basis of cybercommunities, which can create a strong loyalty to the product, web site and microbusiness (Dann and Dann 2001b) • Cultivate a virtual culture for the microbusiness’s clientele. Given that an SLM microbusiness will be dealing in a marketing niche in which it, or the member staff, will have personal relationships and networks, this aspect is a valuable reminder to encourage those members of the target market to continue their interaction with the microbusiness on-line. In addition, as mentioned above, cybercommunities can enhance the value of the microbusiness by creating a supportive community of product users, who can also contribute to the ongoing development and refinement of the microbusiness products (Dann and Dann 2001b). By developing a virtual culture that supports the microbusiness, it also serves to enhance and expand the potential target audience from the initial niche, through the extended on-line social networks of members of that niche. One significant advantage of the Internet over classic distribution channels is the ease with which a niche product can expand its market via a horizontal spread through informal social networks of the primary target niche (Cothrel and Williams 1999).

Continual response: The final and most essential element of the on-line existence of the microbusiness is the need for continual monitoring and response to market changes. A hallmark of the SLM process is the use and reliance on constant feedback from fellow members of the market niche as they use and refine the product to meet their needs. This is one area where the microbusiness has the significant advantage of flexibility and speed of response to changing conditions as it relies on (at most) an initiator convincing four other people to respond to a stimulus. This allows for much faster response times (particularly for solo operated e-microbusinesses) that can begin production of new ideas immediately, when compared with slower requests for formal permission to expand the product line. In this way, most microbusinesses have similar characteristics to entrepreneurs when it comes to responses to environmental change and stimuli (Collinson and Shaw 2001)

Microbusinesses can benefit significantly from engaging in structured and deliberate use of the Internet to maximise their exposure to their target niche, and to gain the maximum outcome for their on-line efforts. Part of this, however, also requires an important initial decision process of determining what role the Internet will play in the product distribution strategy.

Microbusiness: Market Access through the Internet Selecting the market access to be gained through the Internet returns the discussion to the notion of idea driven commerce, and how ideas can be moved across national boundaries through e-commerce. It also poses the question of how the Internet will be used – is it used as a mechanism to reach a global audience, or is it being used by a global company to reach an American (or equivalent single nation) target market? America is singled out in this context for the number of Internet based product distribution services that are located within the US,

and that provide considerable cost advantages for delivering into America (it is noted that an American company distributing into America as part of a global distribution plan remains a global microbusiness. It is only where the primary, or sole target market is sourced from the same nation as the microbusiness’s country of origin, that the microbusiness cannot be classified as a global entity).

Global reach to access Global markets The first and most touted use of the Internet for global marketing has been its role as a low cost, highly accessible global network of exchange (Javalgi and Ramsey 2001). From the perspective of the e-microbusiness, the Internet offers global access to either the microbusiness’s web site, or to a microbusiness facilitator’s web site (see below). Issues of the removal of geographic and time constraints associated with physical store locations give the microbusiness a much greater level of independence in their production and distribution of idea products.

Global Reach to Access USA Market An alternative view of the role of the Internet arises from the current dominance of the American marketplace in their minds of many of the e-commerce marketers, a number of facilitator companies that have geographically limited distribution networks, and numerous trade laws that restrict the movement of certain goods produced in the USA. Rather than seeing the limitations of American based products as flaw in the global e-commerce economy, many international microbusinesses can use these services as a method of entering the American market. For example, a graphics designer working in Puerto Rico designing products with an Hispanic focus can access US based print companies through the Internet, and facilitate an entry into the American marketplace that would otherwise be difficult to

achieve from their home country. Similarly, non-American musicians can distribute their work through American based music web sites without requiring work visa or permits that would be needed to tour America, or an importer to bring the music content into the USA. Consequently, the Internet significantly lowers many of the entry barriers faced by international microbusinesses in entering US markets.

Microbusiness Facilitators: Microbusiness to Business Commerce The ultimate value of the Internet for many microbusinesses has been access to a range of intermediary business to business service providers. The ultimate irony of the Internet has been the rise of the very intermediary channel that it was alleged to have been capable of eliminating. Business to microbusiness commerce has flourished, as idea based commerce providers can create economies of scale in storing, processing and dealing in idea products. One aspect of the rise of the idea product, and the growing success of the business to microbusiness relationships has been the ability of digital products to be reproduced in almost limitless supply without exhausting the original product.

Additionally, the digital product is able to be transferred without recourse to conventional product distribution channels, and usually through a range of automated processes (preset upload scripts where the microbusiness controls the input of the content). The increase in self-service B2B systems works to the advantage of microbusiness operations, as the content creator of the uploaded materials is usually also responsible for the product pricing and description. Compare this to a process where the creator hands over their work to a printer, who produces the products for a wholesaler, who then onsells to a retailer, who writes the product description and sets the price, and this is then conveyed to the target market via public relations and advertising. In niche products, particularly SLM based products where street

credibility and source credibility are important factors for success, it is important to have the shortest viable chain from product producer to product user (preferably the product producer should also endorse their product by being a product user as well). The automation of these processes also works to the advantage of the consumers, who can access the microbusiness’s product without needing to rely on the availability of the microbusiness owner.

Case Studies of Microbusiness Facilitators The final element of the paper examines a brief series of case studies of three different forms of on-line microbusiness idea product facilitators. These are: • • • music distributors short order merchandise; and graphical design printing and production

Global Music Marketplace – MP3 Distribution Perhaps the most infamous use of the Internet as a distribution mechanism was the rise in peer to peer file sharing during the late 1990s with services such as Napster and Gnutella. Whilst the majority of public attention for these services was focused on the illicit trade of copyright materials, these peer to peer services also presented new delivery alternatives for copyright owners wishing to distribute samples of their work. In addition, the recent redevelopment of Napster into a fee paying content search service (partnered with Bertelsmann) permits the opportunity for musicians operating as a microbusiness to use the service to sell their independent music product through Napster (IUMA 2002). Microbusinesses hosting content through IUMA can rely on the service to act as an agent, distributor and collection agency for their products that are distributed through the Napster subscription service.

The independent music industry is also strongly associated with SLM business and microbusiness productions in that many musicians produce music products for their own niche (eg surfers producing surf music, DJs developing turntable equipment), or provide microbusiness services such as small scale recording studios or video productions to fellow artists.

Just in Time Microproduction – Delivering to a Market of One Associated with the development of microbusiness music producers is the concept of just-intime microproduction, which is designed to service the product needs of the microbusiness sector. One on-line music host, MP3.com, provides just-in-time production of short runs (include individual pressings) of mixed media audio and data CDs for the microbusiness musicians using their site. Similarly, other microproduction services such as Cafepress.com produce short run merchandise for microbusiness clients. The Cafepress service hosts the microbusiness user’s images associated with a range of products (eg mugs, shirts, mousepads and hats), and also provides secure on-line purchasing arrangements for the store. The microbusiness owner provides the graphical content for the products in a non-exclusive licence arrangement, and the Cafepress site provides the production, on-line store, and shipping for the microbusiness.

On-line Art Production- Idea Driven Commerce The third aspect of business to microbusiness support is the manufacture of idea driven commerce products by enterprises such as Zazzle.com. The Zazzle site provides on-line hosting for high resolution graphics that can be purchased through the site as posters printed to either high resolution paper or direct to canvas. One of the key points of the service, which they highlight to potential customers and users, is that they see their role as enablers of idea

commerce by providing the intermediary function of production and shipping for digital content. Microbusinesses using this service can focus on the production of the idea content (artistic work) without needing to develop extended supply chains of printers, art exhibitors and distribution networks. The Zazzle service also facilitates niche orientated art publishing by offering a key word (up to 9 per image) search mechanism, and up to four genre locations (eg landscape, religion, patriotic, college life) in order to unite similar art and artists, as both a convenience to the consumers using the service, and the intra-niche focused microbusiness artists.

The essence of these services is to provide economies of scale to collective groups of microbusinesses by diffusion of establishment costs of capital equipment across a wide range of product users. Systems such Zazzle and MP3.com allow the microbusinesses to produce just-in-time products without the expense of start up costs, or the need to sink large amounts of capital into product stockpiles

Conclusion The emergence of facilitator organizations on the Internet opens up a vast array of marketing opportunities for micro businesses. The global nature of the Internet brings with it potential for global expansion, although in the past, the logistics of shipping world wide were often beyond the scope of micro businesses. Having access to products sales website that could not deliver the products was more likely to cause frustration for out of range potential customers than to make sales. Recognising that many micro businesses are intra niche operators, traditional marketing models are of little relevance as they assume a level of resourcing for

marketing activities that is unrealistic. Consequently the street level approach appears most relevant to their needs.

The emergence of the successful new model of on line facilitator organizations simultaneously overcomes problems of marketing, production and delivery for globally focused micro businesses. Assuming the continued development and acceptance of facilitator organizations on line, barriers to entry for small businesses, particularly into difficult to enter markets like the US, will continue to be substantially reduced. Further the new business model of just in time off shore manufacturing opens up new opportunities for a variety of creative micro businesses. This paper has outlined some of the current developments in this field and provides a basis for future comparison as the global micro business develops as a future trend in international commerce.

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