Professional Documents
Culture Documents
Hossein Hakimpoor
Abstract
The empirical studies investigating a direct relationship between strategic planning and performance have
attracted criticisms, including the use of a bi-variate methodology. While this relationship is critical to
organizations using strategic planning, the critics suggest that other factors will affect on the relationship
between strategic planning and performance. In this article, the authors propose that structural dimensions
of marketing network are important moderators on relationship between strategic marketing planning
(SMP) and SMEs’ performance.
Corresponding Author: Hossein Hakimpoor, Faculty Member of Islamic Azad University Birjand Branch and PhD.
Candidate of Universiti Teknologi Malaysia (UTM), Email: hhossein3@live.utm.my
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1. Introduction
In most countries worldwide, small and medium-sized enterprises (SMEs) sector contributes considerably
to the economy, through its products and services and shapes an important part of the developed and
developing economies. The SMEs sector in Malaysia plays an important role in the national economy.
The sector's contributions to the nation's economy can be seen from various aspects such as in terms of
business units, employment opportunities as well as economic output. Aside from these contributions, the
SMEs sector in Malaysia is also known to make other valuable contributions such as regional income
generation, savings, training, stimulation of competition, aiding large firms, introduction of innovation,
and as a seed-bed for growth (Mohd khairuddin Hashim, 1999). According to the report, SMEs
contributed as much as 37% of the nation’s gross domestic product in the year 2010 (new Straits Times,
10 July, 2009). The percentage of SMEs in the manufacturing sector is 99.2 and they contributed 30.90
percent of total value of manufacturing output and 31.80 percent of employment provided in the
manufacturing sector and 70.4 percent of manufacturing exports. Despite their pivotal role and
contribution, limited studies have emphasized on the SMEs (M. Hashim, khairuddin & Zakaria, 2007).
While a number of empirical studies have investigated strategic management practice n large firms, little
research has focused on this area of management in small- and medium-size enterprises (SMEs),
particularly in the Malaysian context (M. k Hashim, Wafa S, & Sulaiman.M, 2003). However (M.
Hashim, khairuddin & Zakaria, 2007), state that not only do the SMEs place emphasis on strategic
thinking, but SMEs also focus on strategic thinking practice.
Although the literature provides support for the importance of strategic planning and marketing practice
for SMEs (French, Kelly, & Harrison, 2004; Harris, 2000; M. Hashim, khairuddin & Zakaria, 2007;
Kraus, Harms, & Schwarz, 2006; Sengupta & Chattopadhyay, 2006; Mike Simpson & Taylor, 2002), but
there is very little objective data relating marketing activities to business performance in SMEs yet there
are claims by academics and managers that marketing activities do improve business performance (M
Simpson, Padmor, Taylor, & Frecknall-Hughes, 2006). Furthermore there is an observable difference
between marketing activities conducted by SMEs and best practice defined in academic theory (Parrott,
Roomi, & Holliman, 2010). Strategic marketing planning (SMP) is a rational series of activities that leads
to the setting up the marketing objectives, the formulation of plans to attain them, and the determination
of benchmarks against which marketing fulfillment can be judged(M. H. B. McDonald, 1992).
Networking is a naturally inherent aspect of SME owner-manager decision making, particularly those
decisions relating to marketing. This is because owner/managers must go outside the businesses' physical
confines in order to do business and this business is marketing-led activity(Gilmore, Carson, & Grant,
2001). There is clear evidence that SMEs actively network(D Carson, Gilmore, & Rocks, 2004). In the
context of SMEs, the existence of an owner/manager’s network is built around his/her normal interactions
and activities (Rocks, Gilmore, & Carson, 2005). Network theory suggests that the ability of owners to
gain access to resources not under their control in a cost effective way through networking can influence
the success of business ventures(Zhao & Aram, 1995).
In this article the authors propose the structural dimensions of marketing networks as important
moderators on the relationship between strategic marketing planning and SME’s performance. In addition
based on literature review we consider the role of some contextual variables that have effect on strategic
planning and performance relationship in the SME’s context.
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2. Literature Review
The empirical research in strategic planning systems has focused on two areas: the impact of strategic
planning on firm performance and the role of strategic planning in strategic decision making(Grant,
2003). The literature has acknowledged the importance of relationship strategic planning and marketing
planning for the performance of firms and their competencies in the business world. Although in spite of
nearly forty years of empirical study, evidence regarding the relationship between strategic planning and
performance has been criticized as ambiguous (Rudd, et al., 2008). In addition special research on
strategic marketing and performance in SMEs are still very limited. While there are empirical supports for
a positive relationship between strategic planning and performance (Claycomb, Gearmin, & Droge, 2000;
Glaister, Omer, Tatoglu, Demirbag, & Zaim, 2008; Hopkins & Hopkins, 1997; Rudd, et al., 2008) there
are also evidences proposing that no such relationship exists (Falshaw, Glaister, & Tatoglu, 2006; French,
et al., 2004; Siu, Fang, & Lin, 2004). This dichotomy has impede the development of this important
research field(Greenley, 1994; Hahn & Powers, 1999). The empirical studies investigating a direct
relationship between strategic planning and performance have attracted criticisms, including the use of a
bi-variate methodology(Rudd, et al., 2008).While this relationship is critical to organizations using
strategic planning, the critics suggest that other factors will affect on the relationship between strategic
planning and performance (Meilich & Marcus, 2006; Rudd, et al., 2008). In addition Robinson and Pearce
(1983) stated that previous studies that examining the link between formalized strategic planning and firm
performance often did not control for the differential effects of market conditions. Therefore using the
role of moderators and control variables in relationship between strategic marketing and performance
would be very useful to better understanding of this relationship.
The literature review indicates that in spite of the importance of SMEs and the increase in knowledge in
strategic management, few empirical studies have examined SMEs from this perspective (Hashim, 2003;
Bin Ahmad, 2005). Moreover it would appear that marketing did contribute positively to small business
success and the ability to think strategically (Simpson et al., 2006). This clearly indicates the importance
of strategic marketing to SMEs’ performance. Moreover Porter (1991) uphold that critical to the survival
and success of smaller, entrepreneurial companies, is their ability to think and plan strategically, and the
last purpose of all strategic marketing efforts is the development of a sustainable competitive advantage
for the business (Harris, 2000). Bin Ahmad (2005) indicates that strategic factors seem to significantly
influence the business performance of Malaysian exporting SMEs.
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network that is likely to encompass all aspects of their business (Gilmore, Carson, Grant, Pickett, &
Laney, 2000). The literature supports the three dimensions of MN that have been identified, to help better
understand networking in SMEs within a marketing context. First, the structural dimension is defined in
terms of sources used (Johannisson, 1987), and focuses on the physical structure of each marketing
network. This is a logical starting point for understanding MN within SMEs in that it builds upon existing
research which has examined the physical nature of SME networks addressing fundamental questions,
what do they look like and who is involved in them.
Second, the relational dimension is defined in terms of network linkages and measured in terms of the
strength of the marketing network linkages which exist (Anderson et al., 1994).
Finally, the third dimension of MN is the usage dimension that is defined in terms of how the MN of
SMEs influences their marketing activities. So having examined both the structural and relational
dimensions of MN, the usage dimension focuses on the outcomes or benefits as a result of owner-
manager network activities. In short, this aspect of MN answers key questions such as, why are MN used
in SME marketing and when are MN used in SME marketing?
Previous studies have researched networks in terms of the sources used(Araujo & Easton, 1996), so the
logical starting point for researching networking in SMEs is to determine the sources used by individual
SME owner/managers and build up a picture of the physical structure of each network . A key objective
of this study is to focus on each SME, to determine the network structure and therefore understanding the
structural dimension of each marketing network. The structural dimensions of each marketing network is
defined in terms of structural components including network size, network formality, network diversity,
network density, network stability, and network flexibility(D Carson, et al., 2004; Rocks, et al., 2005).
3.1. Network size is defined as actual number of direct contacts used by the owner-manager in each SME,
to help him or her do marketing (Rocks, et al., 2005). It is measured by counting the number of
sources used within the firm and outside to make marketing decisions or carry out marketing
activities. There is some evidence that SME networks are extensive (Butler and Hansen, 1991).
3.2. Network formality is closely related to the concept of network diversity and is defined as the extent to
which formal business network contacts are used in doing marketing compared to informal and social
network contacts. It is therefore measured by counting the number of strong network contacts which
an SME owner-manager has of a formal nature and social nature (Brown and Butler, 1993; Borch and
Huse, 1993; Bryson et al., 1993; Brodie et al., 1997).
3.3. Network diversity is defined in terms of the variety of network sources used. It is measured by
counting the number of different network sources that an SME owner-manager uses in doing
marketing(D Carson, et al., 2004).
3.4.Network density is defined in terms of the connectedness that is the extent to which network
members are linked to each other (Cromie and Birley, 1992).
3.5. Network stability is defined as the number of network linkages within the marketing network of an
SME owner-manager that have existed for a minimum length of time. Network stability is measured
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by determining how many of these linkages between an SME owner-manager and his or her network
sources have existed for a certain time (D Carson, et al., 2004; Rocks, et al., 2005).
3.6. Network flexibility is closely related to network stability but is a distinct feature of network structure.
Network flexibility is defined as the number of network linkages formed and the number of network
linkages broken within a specific period. It is measured by establishing the number of new and broken
linkages within a specific time period ( Johanson and Mattsson, 1987).
The extent of marketing in each firm is related to the level of networking, whereby an SME owner-
manager who proactively networked and utilized his/her marketing network processes displayed a
sophisticated level of marketing(Gilmore, Carson, & Rocks, 2006).
The concept of networking can be further developed by studying the network linkages which exist within
the marketing network of an SME owner-manager. The literature argues that formation and subsequent
success of SME networks is largely determined by the owner-manager’s efforts and skills to develop
cooperative goals with network members (D’Cruz and Rugman, 1994; Tjosvold and Weicker, 1993). This
introduces a relational aspect whereby marketing networks are considered in terms of the strength of the
linkages and the relational components which determine that strength, principally trust, commitment and
co-operation.
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4.4. Technology
According to contingency theory, firms should formulate and implement business strategies based on
their environment as well as competitive advantages such as technology (Claycomb, et al., 2000; M.k
Hashim, Wafa, & Sulaiman, 2003). Hitt, Irland, & Hoskinson, (2003), Wheelen (2002), David (2001),
emphasized that technology forms one of the forces that can drive strategic change in organizations.
These authors stressed on the importance of relationship that exist between technology, strategy, structure
and organizational performance. (M.k Hashim & Ahmad, 2005; M.k Hashim, et al., 2003) They argued
that technology and environment are important contingency factors that have moderating effect on the
relationship between business strategies and performance of SMEs. Their finding point out that business
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strategy may lead to better performance under conditions of grater technological complexity of process
and product.
5. SMEs’ performance
Measurement is very important and is the only approach to understand whether performance is improving
or worsening and whether correction action is needed urgently (Roussel, 2005). But the measurement of
the performance of SMEs seems to be difficult and problematic. The performance of SMEs is difficult to
assess because of normal fluctuations in activities arising from year to year (M Simpson, et al., 2006)(M
Simpson, et al., 2006). The principal performance measures are financial returns and firm growth (short
and long term) (Daily, McDougall, Covin, & Dalton, 2002). Some researchers(M. Hashim, khairuddin &
Zakaria, 2007; Sa'ari, 2005) have measured the performance of exporting SMEs by using the return on
assets (ROA), return on sales (ROS), return on investment (ROI), and also growth. Growth is based on
the composite of the average performance of the ROA, ROS and ROI of the SMEs (BPCI). Sousa,
Aspinwall, & Rodrigues, (2006) based on their work on English SMEs stated overall, financial measures
are most widely used than another measures for performance measurement in SMEs. They stated
difficulty defining new performance measures and training of employees are most important obstacles to
the adoption of new performance measures. Regarding that as most small firms are privately held, it is
unlikely that CEOs will be willing to provide detailed accounting data on the firm’s performance (Garg,
Walters, & Priem, 2003). Therefore selecting a “subjective, self-reporting measures of performance” is a
well-established approach in management research(O'Regan & Ghobadian, 2004). These authors state
that effective performance measurement system ought to cover all indicators of performance that are
relevant for the existence of an organization and the means by which it achieves success and growth. This
means that any performance measurement system ought to include more than just financial measures.
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As stated earlier, the authors propose a model on relationship between strategic marketing planning
(SMP) factors and SMEs’ performance regarding the moderating effect on structural dimensions of
marketing network. Based on the literature review, we propose formality of strategic marketing planning
as independent variable and subjective measures SMEs’ performance consist of ROI,ROA,ROS and
BPCI as dependent variables. Meanwhile, structural dimensions of marketing network are proposed as
moderator variables.
6. Proposed model
Moderators
Structural dimensions of marketing networks
SMEs’ performance
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7. Hypothesis
The following hypothesis are proposed to test the validity of the model
1. The size of marketing network will positively moderate the relationship between SMP and SMEs’
performance.
2. The formality of marketing network will positively moderate the relationship between SMP and
SMEs’ performance.
3. The diversity of marketing network will positively moderate the relationship between SMP and
SMEs’ performance.
4. The density of marketing network will positively moderate the relationship between SMP and
SMEs’ performance.
5. The stability of marketing network will positively moderate the relationship between SMP and
SMEs’ performance.
6. The flexibility of marketing network will positively moderate the relationship between SMP and
SMEs’ performance.
8. Methodology
To test the hypotheses, a survey method will use to seek responses from SMEs’ owners-managers. Data
for this study will collect using self-administrated questionnaires via a mail survey from strategic decision
makers (SMEs’ owner-manager) to identify the characteristics of the marketing planning behavior of
successful small firms and testing the relationship between this behavior and performance. All the
measures in our study are grounded in literature and adopted, with modification, from previous studies.
The sample will be based on Malaysian SME Business Directory. Regarding the control variables, the
Stratified Random Sampling Method will be used. We will use the ability of Artificial Neural Networks
(ANNs) to analyzing the relationship between SMP and SMEs’ performance regarding the moderating
effects of structural dimensions of marketing network. Artificial neural networks are distributed
information-processing systems composed of many simple computational elements interacting across
weighted connections (Venugopal & Baets, 1994). Inspired by the architecture of the human brain, ANNs
exhibit certain features such as the ability to learn complex patterns of information and generalize the
learned information. In particular, the ability of neural networks to identify patterns in the data could be
utilized in market research, especially in areas which were once reserved for multivariate statistical
analysis. For this reason, neural networks are often considered to be statistical methods (White, 1989).
9. Conclusion
The proposed model provides the moderating link amongst structural dimension of marketing network
and relationship between SMP and SMEs’ performance. The authors’ intention is to fill up the gap about
the lack of research on SMP-Performance relationship in SMEs’ context. Furthermore, the study will be
carried out resulting from the proposed model to investigate the role of structural dimensions of
marketing network as important moderators on this relationship, in regard with some contextual variables
as control variables. It is expecting, this study contributes to clarifying the importance of structural
dimensions of marketing network on the relationship between SMP and SMEs’ performance and could
help to SMEs’ owners-managers in their marketing planning and increasing their performance.
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Aknowledgments
The authors would like to thank Islamic Azad University Birjand Branch for its financial supports. We are also very grateful of
Universiti Teknologi Malaysia (UTM) and Ministry of Higher Education of Malaysia for their sincere supports.
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