Impacts of social media on business performance of Vietnamese SMEs

Impacts of Social Media on Business Performance of

Vietnamese SMEs

– Master Thesis –

to be awarded

Master of Science in Economics

submitted by

Bui, Thi Phuong Hong

15th October 2018

Email: [email protected]

Address: WG. 604, Karl-Marx-Allee 1, 07747 Jena

Student ID: 163398

Supervisor:

1st: Prof. Dr. Uwe Cantner

2nd: Dr. Maximilian Göthner

Friedrich-Schiller-Universität Jena

Fakultät für Wirtschaftwissenschaften

Lehrstuhl für Mikroökonomik

Carl-Zeiß-Str. 3

07743 Jena

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ABSTRACT

Social media is widely accepted as one of the most effective marketing channels for enterprises.

Although it brings many benefits to companies, there are still some potential risks. Furthermore,

there is no comprehensive study on the impact of social media on business performance,

especially for developing countries such as Vietnam. Based on related theories and studies, we

propose an ordinal three-step model explaining the way social media influences business

performance. Accordingly, in the first step, enterprises use social media to carry out five

activities, including business branding, call for purchases, public relations/customer service, re￾posting of customer reviews, and product introduction. In the second step, these activities affect

three crucial customer perceptions, namely customer engagement, brand awareness, and

information diffusion. In the last step, these three issues directly affect business performance,

especially sales and customer growth. We used direct questions, multivariate regression and

structural equation modelling (SEM). While there is still some mixed evidence for particular

issues within our proposed model, we have confirmed that social media strongly improves

business performance for small and medium enterprises in Vietnam by increasing customer

engagement, enhancing brand awareness and promoting information dissemination. We also

find that the format of social media messages has a significant impact on customer’s perception

and the effectiveness of communication. Last but not least, we discover that the respondent’s

perception varies according to the type of company they have worked for and personal

characteristics.

Keywords: Social media, business performance, customer engagement, brand awareness,

information diffusion

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TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION ..........................................................................................4

1.2. Significance of the study..................................................................................................8

1.3. Research questions and objectives of the study ................................................................9

CHAPTER 2: LITERATURE REVIEW..............................................................................10

2.1. Overview of social media ..............................................................................................10

2.1.1. Definition of social media .................................................................................................. 10

2.1.2. The role of social media ..................................................................................................... 10

2.2. Business performance and its measurement ...................................................................11

2.2.1. Definition of business performance .................................................................................... 11

2.2.2. Measurement of business performance ............................................................................... 11

2.3. Theoretical perspective on the relationship between social media and business

performance .........................................................................................................................12

2.3.1. General theory of marketing............................................................................................... 12

2.3.2. Marketing mix theory......................................................................................................... 14

2.3.3. Theory of buyer behaviour ................................................................................................. 14

2.3.4. Theory of decision-making................................................................................................. 16

2.4. Empirical evidence on the impact of social media on business performance...................19

2.5. Conceptual framework and hypotheses on the relationship between social media and

business performance ...........................................................................................................22

2.5.1. The proposed research model ............................................................................................. 22

2.5.2. Hypotheses......................................................................................................................... 23

CHAPTER 3. RESEARCH METHODOLOGY ...................................................................25

3.1. Research design.............................................................................................................25

3.2. Time and place of study.................................................................................................25

3.3. Population, sample size and sampling technique ............................................................25

3.4. Research instrument ......................................................................................................25

3.5. Data gathering procedure...............................................................................................26

3.6. Methods of data analysis................................................................................................27

CHAPTER 4: FINDINGS AND DISCUSSIONS .................................................................29

4.1. Description of respondents.............................................................................................29

4.1.1. Age.................................................................................................................................... 29

4.1.2. Gender............................................................................................................................... 29

4.1.3. Marital status...................................................................................................................... 30

4.1.4. Educational attainment....................................................................................................... 31

4.1.5. Work department................................................................................................................ 31

4.1.6. Employment position ......................................................................................................... 32

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4.1.7. Years of experience............................................................................................................ 33

4.1.8. Type of the company.......................................................................................................... 33

4.1.9. Type of business activities.................................................................................................. 34

4.2. Current status of social media use of SMEs in Vietnam .................................................35

4.2.1. Social media participation .................................................................................................. 35

4.2.2. An assessment of using social media by SMEs in Vietnam ................................................. 41

4.3. Impacts of social media on business performance of SMEs in Vietnam .........................47

4.3.1. Quality analysis of the impact of social media on business performance ............................. 48

4.3.2. Empirical analysis of the impact of social media on business performance.......................... 62

4.3.2.1. Evidence from multivariate regression............................................................................. 62

4.3.2.2. Evidence from SEM........................................................................................................ 70

Chapter 5: CONCLUSION, IMPLICATION AND FUTHER STUDY.................................74

5.1. Conclusions...................................................................................................................74

5.2. Implications...................................................................................................................76

5.2.1. Policy implications............................................................................................................. 76

5.2.2. Improve participation and performance of social media ...................................................... 78

5.2.3. Enhancing customer engagement........................................................................................ 80

5.2.4. Increasing business awareness............................................................................................ 82

5.2.5. Improve information diffusion............................................................................................ 83

5.3. Limitations and further studies.......................................................................................84

REFERENCES.....................................................................................................................86

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LIST OF TABLES

Table 1: The Likert five-point scale .....................................................................................26

Table 2: The business lines of the surveyed enterprises.........................................................34

Table 3: Types of advertising and media...............................................................................35

Table 4: Social networking sites...........................................................................................36

Table 5: Information posted on the social networking sites...................................................38

Table 6: Purposes in using social networking sites................................................................39

Table 7: The use of social media...........................................................................................42

Table 8: Social media and customer engagement..................................................................48

Table 9: Social media and brand awareness..........................................................................52

Table 10: Social media and information diffusion.................................................................56

Table 11: Customer engagement, brand awareness, information diffusion and growth of sales

and customers...............................................................................................................59

Table 12: Social media and business performance ................................................................60

Table 13: Message format and social media performance .....................................................62

Table 14: The model of perceptive growth of sale (Q53) ......................................................64

Table 15: The model of perceptive growth of sale (Q53) (continued)....................................65

Table 16: The model of actual growth of sale (Q12).............................................................67

Table 17: The model of perceptive growth of customer (Q54)..............................................68

Table 18: The model of perceptive growth of customer (Q54) (continued) ...........................69

Table 19: The model of actual growth of customer (Q13).....................................................70

Table 20: Estimated results of structural equation modeling (SEM)......................................72

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LIST OF FIGURES

Figure 1: The model of buyer behaviour ..............................................................................15

Figure 2: The buying decision process .................................................................................17

Figure 3: The proposed research model ................................................................................22

Figure 4: Structural equation modelling for impacts of social media on business performance

.....................................................................................................................................28

Figure 5: The age of the respondents....................................................................................29

Figure 6: The gender of the respondents...............................................................................30

Figure 7: The marital status of the respondents.....................................................................30

Figure 8: The educational attainment of the respondents.......................................................31

Figure 9: The work department of the respondents ...............................................................32

Figure 10: Employment positions of the respondents............................................................32

Figure 11: The years of working experience of the respondents............................................33

Figure 12: The type of surveyed enterprise ...........................................................................34

Figure 14: Experiences in using social networking sites........................................................36

Figure 15: Frequency of using social media..........................................................................37

Figure 16: The growth of frequency in using social media....................................................37

Figure 17: Numbers of followers on the social networking sites ...........................................38

Figure 18: Integration of direct sale system ..........................................................................40

Figure 19: Revenue from direct sales systems of online social networking sites....................40

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LIST OF ABBREVIATION

SEM Structural equation modeling

NAND Neither Agree or Disagree

MLMV Maximum likelihood with missing values

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CHAPTER 1: INTRODUCTION

1.1. Background of the study

Social media is the communication channel in which users have the ability to share

information and update/respond to other peoples’ information. All these media platforms

converge in such a way that they are together considered social media. With this view, not only

social networks like Facebook and Twitter, but also forums, YouTube, Instagram, Zalo, and

even news sites are all considered to be part of social media.

Social networking is a tool that enterprises use to inform their customers about their

product offerings. Hence, social media can enable businesses to become more prominent in the

eyes of customers. Equally, using social media can help firms connect with other companies

within their sector, research and study each other, analyse competitors and develop more

effective media strategies. Furthermore, social media is a way of communicating between

customers and companies and is a tool for firms to answer customer queries and to satisfy them.

Social media includes tools that combine technology and language skills to promote a

brand image of a business on the Internet at a low cost with superior performance. Social media

gives marketers a voice and new ways of communicating with customers and prospects.

Branding is a means for companies to deliver messages to customers through content that is

distributed in the most effective way. Marketers view social media as a vital element of their

business and take into account all the activities that take place on social media networks.

In Vietnam, with the development of Yahoo 360, the first social media platform, some

brands quickly used it to promote their image. Social media marketing in Vietnam actually

began in the 2008-2009 period, following the success of the Close-Up branding campaign,

which opened the way for social media campaigns by other big brands. It can be said that the

main milestone in the development of social media after the decline of Yahoo 360 from 2008-

2009 was the arrival of Facebook in 2011. With the rapid development of the number of users

in Vietnam, Facebook emerged as a “fertile land” that brands wanted to exploit.

The biggest advantage to businesses in Vietnam is that there are not many popular social

media platforms. Vietnamese users still focus on major social networks such as Facebook and

YouTube and major forums (some teenagers use Zalo, which is the second largest social

network). Therefore, in Vietnam, the investment in social marketing is more concentrated, more

resource-efficient and easier to measure.

Social media marketing has the potential to be a great way for small and medium-sized

businesses in Vietnam to increase brand awareness with customers. Companies can also create

a playground for the participation of customers, as well as trying to improve customer loyalty

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with their products and services. Alongside the positive elements mentioned, social media is

also a huge “trap”, because it can consume a lot of money for connecting the community with

the marketing campaign and advertisers can be denigrated by competitors. Therefore, this study

considers the impact of social media on the business performance of small and medium-sized

enterprises in Vietnam and considers whether or not investment in developing social media

activities is the right strategy. Further, the question as to which policies the government should

use to promote the efficiency of social media for small and medium-sized enterprises in

Vietnam will be addressed.

1.2. Significance of the study

This study is expected to contribute knowledge to the effective and efficient

management of labour exports; hence, it will benefit the following sectors:

• International employers. Based on the analysis of this paper, Vietnam’s government

will build special action plans to improve the competitiveness of Vietnamese labour.

Hence, international employers will gain access to better and more competitive

labour in the future.

• Vietnamese workers. This study will help workers understand their strengths and

weaknesses. In addition, workers will be made aware of the requirements of

international employers in term of academic performance, technical skills,

communication skills, performance ratings of previous employers, working

seniority (in previous companies) and personal characteristics. Thus, Vietnamese

workers can prepare and study to improve their abilities and increase their potential

for success; this will provide them with assessments and direction in applying for

work abroad in the future.

• Managers of labour export. This research will help these managers understand the

requirements of international employers. The research will provide them with

important suggestions on how to build action plans for improving the

competitiveness of Vietnamese labour. The paper could help build the reputation

and competitive advantage of Vietnamese labour through superior innovation and

meet the expectations of international employers.

• Vietnamese government. This paper will study the current status of Vietnamese

labour in term of strengths and weaknesses; it will also provide useful information

about the requirements of foreign labour importers. It will be a good basis for the

Vietnamese government in planning labour development, especially export

activities.

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Other researchers. This study will help other researchers to collect necessary

information in relation to their research fields. Other researches will also consider the

limitations of this research as they conduct future research related to this field of study.

1.3. Research questions and objectives of the study

There are two important questions that need to be studied:

(1) What is the status of using social media by small and medium-sized enterprises

(SMEs) in Vietnam?

(2) How does social media influence business performance?

To answer these two questions, this thesis focuses on assessing the current status of

social media use by Vietnamese SMEs by analysing the results of an enterprise survey, drawing

out good and bad points about the application of social media for marketing by these

enterprises. In particular, the thesis evaluates the impact of social media on the business

performance of Vietnamese SMEs. Based on the results of the analysis, the thesis provides

suggestions for businesses to improve the effectiveness of using social media in marketing.

The thesis is organised into five chapters. Chapter 1 explains the importance of social

media to businesses, as well as the current issues in the social media debate, research objectives,

and the scope of research.

Chapter 2 focuses on the basics of social media and business performance and business

performance indicators, as well as research on the relationship between social media and

business performance both theoretically and practically. From this literature review, the author

presents the proposed research model.

Chapter 3 introduces the research methodology, sample selection and sampling

procedures, as well as the analytical methods used to answer the research questions.

Chapter 4, based on the results of the survey, analyses the current use of social media

in marketing by SMEs in Vietnam. In addition, it uses multivariate regression to assess the

impact of social media on the business performance of Vietnamese SMEs.

Chapter 5 summarises the results of the research and provides solutions to improve the

effectiveness of using social media for SMEs in Vietnam.

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CHAPTER 2: LITERATURE REVIEW

2.1. Overview of social media

2.1.1. Definition of social media

What is social media? Social media is a subject of concern to many enterprises,

executives and policymakers, but the concept of social media and the way corporations can take

advantage of social media are very limited (Kaplan & Haenlein, 2010). Social media is

generally described in relation to Web 2.0 and ‘user-generated content’. In their study, Kaplan

and Haenlein (2010) attempted to divide social media into groups, namely: collaborative

projects, social networking sites, virtual games worlds, social worlds, blogs, and content

communities. Social networking sites are the largest and most important part of social media.

The term social media has tended to be used interchangeably with the term “Web 2.0”, and can

be identified by the following principal categories (Constantinides & Fountain, 2008):

• Blogs: Encompassing individuals’ or enterprises’ online journals and often

combined with audio or video podcasts.

• Social network: Applications allowing users to build personal websites accessible

to other users for exchanging content.

• Content communities: Websites organising and sharing particular types of content.

• Forums: Sites for exchanging ideas usually around special interests.

• Content aggregators: Applications allowing users to customise fully the web

content they wish to access.

2.1.2. The role of social media

The importance of social media lies in the interaction between people and in the

facilitation of asynchronous, immediate, interactive, and low-cost communications. So, what is

the role of social media in business? There are three reasons why it becomes necessary.

Firstly, social media helps a business raise awareness of its brand. Branding is always

one of the top goals in many marketing campaigns. When focusing on this goal, the problem

for many brands, especially e-commerce brands, is that it is not possible to create links that

connect with customers by emotion. Fortunately, social media can solve this problem. With

creative approaches and consistent content, a brand can be brought to life.

Secondly, social media helps to increase traffic. Social media platforms are increasingly

playing a role in bringing users to business websites. There is a view that Facebook has

overtaken Google in terms of influence on the Internet. Increased traffic is generally

proportionate to improving sales effectiveness.

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Thirdly, social media is the place to go to for information and knowledge. With social

networks, users can update a lot of information and knowledge without having to go to the

newspaper networks. This information is what businesses collect in order to understand users

or new trends that are of interest in the community. To do this, businesses can use social

listening tools, to listen and watch what is happening in social networks. From the information

and knowledge gathered, firms can improve their campaigns and processes.

2.2. Business performance and its measurement

2.2.1. Definition of business performance

Business performance, or organisational performance as the broader term, is widely

accepted as the actual outcome or results of a company as measured against its inputs.

According to Richard et al. (2009) business performance can be grouped into the

following three areas: (i) financial performance (profits, return on assets, return on investment,

etc.); (ii) product and market performance (sales, market share, etc.); and (iii) shareholder return

(total shareholder return, economic value added, etc.).

2.2.2. Measurement of business performance

Business performance is a very broad topic and measuring it is not easy. In terms of

enterprise resources, a firm's business performance is determined by the efficiency of using

resources and transforming them into increased competitiveness advantage (Barney, 1991; Day,

1994). Notable factors that reflect business performance are financial capacity, operational

optimisation and social performance (Carroll, 1979; Venkatraman & Ramanujam, 1986).

Financial performance focuses on the growth of sales and customers, or profitability.

Operational performance reflects operating efficiency, market share or customer satisfaction.

Social performance relates to reputation, brand awareness or the public image of the company.

Needly (2002) and Taticchi (2010) synthetize some business performance indicators

and their formulas as follows:

* Financial performance:

- Profit:

Profit = Revenue − Cost

- Return on Investment (ROI):

Return on Investment = Revenue − Expenses

Expenses

× 100%

- Return on Assets (ROA):

Return on Asset = Net Profit

Total Assets

× 100%

- Return on Equity (ROE):

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Return on Equity = Net Profit

Total Equity

× 100%

- Rate of Return:

Return on Equity = Net Profit

Net Revenue

× 100%

* Market performance and Business Growth:

- Sales, growth of sale

- Customers, growth of customer

- Market share

* Shareholder return:

- Total shareholder return

- Economic value added

Due to time and budget constraints, this study focuses on aspects of financial

performance, particularly the growth of sales and customers, which are the two most important

issues that determine the survival of an enterprise.

2.3. Theoretical perspective on the relationship between social media and business

performance

In general, the use of social media is a widely recognised part of marketing. To be

precise, social media, in this context, is a tool in marketing that is used to deliver messages and

connect with customers. Marketing is broad as “a discipline uniting activities aimed at

enhancing the potential for sales of goods and services”. Social media, although part of

marketing, is not fully researched in relation to business performance. This section analyses a

number of related theories to establish how social media affects business performance.

2.3.1. General theory of marketing

The theory of marketing was first developed and introduced by an American Marketing

Association (AMA) conference in Pittsburgh in 1946. It aimed to describe the essence of

marketing as well as create a framework for modern economics. Alderson and Cox (1948) put

forward the need for a common marketing theory and provided a comprehensive approach on

the basis that marketing theory should be general and appropriate for all areas. Bartels (1968)

shares the same view as Alderson and Cox (1948) on the importance of developing marketing

theory. He used a “cumulative approach” to suggest that general marketing theory should be

synthesized from seven theories:

• The theory of social initiative; economic separations

• The theory of market roles, expectations, interactions

• Flows and systems

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• Behaviour constraints

• Social change

• Marketing evolution

• The theory of social control

Two years later, Bartels (1970) restated his view of marketing in terms of five theories,

which all remain relevant:

• Theory of marketing functions

• Historical institutional evolution

• Small versus large-scale activity

• Integration

• Theory of specialisation

Hunt (1983, p. 24) continued to develop the theory of marketing with a combination of

four important theories:

• Theory of buyers’ behaviours

• Theory of sellers’ behaviours

• Institutional framework

• Behaviours of buyers, sellers and institutional frameworks

Marketing is described as “a behavioural system of exchange” (Bagozzi, 1979) or

“exchange process” of the company to the market and what is exchanged here can be products,

services, ideas, messages and even emotions.

However, there are many other approaches to marketing. Kuhn (1996) defines

marketing as a “set of sales and distribution practices.” Levitt (1960) and Keith (1960) describe

marketing as “customer-centred rather than product-centred”. In addition, there are many other

paradigms of marketing (Fournier 1998; Palmer & Ponsonby 2002).

The American Marketing Association first officially defined marketing in the 1960s as

“performance of business activities that direct the flow of goods and services from the producer

to the consumer or user” (AMA 1960, in Keefe 2004). In 1985, the concept was refined into

“Marketing is the process of planning and executing the conception, pricing, promotion, and

distribution of ideas, goods, and services to create exchanges that satisfy individual and

organizational objectives” (AMA 1995, in Keefe 2004). The recent marketing concept was

introduced in 2004, in which marketing is defined as “an organizational function and a set of

processes for creating, communicating, and delivering value to customers and for the benefit of

the organization and its stakeholders” (AMA 2004, in Keefe 2004). In the field of business,

Belz (2005), Tomczak and Brexendorf (2005) emphasise that the tasks of marketing include

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public relations, branding, marketing communications, customer relationship and sales channel

development.

As a part of marketing, social media may be used to deliver company messages with

various contents for numerous purposes, i.e. call for purchases, public relations, business

branding or product introduction. These messages may influence customers’ perceptions and

interactions, and they also potentially increase information diffusion about the company and its

products and services.

2.3.2. Marketing mix theory

Marketing mix is often considered as a tool to help businesses determine which products

or brands to offer. Kotler (2000) defines it as “the set of marketing tools that the company uses

to pursue its marketing objectives in the target.” Initially, McCarthy (1964) introduced

marketing mix with 4 Ps: Product (product needs to meet demands and expectations of

customers); Place (customers must have easy access to the product); Price (price must be

reasonable); Promotion (companies need to use advertising, public relation, sales promotion,

social media to reach potential customers).

Booms and Bitner (1981), Kotler (2012) expanded the marketing mix model and added

4 Ps: People (the company needs to ensure the quality of human resources and build positive

relationships with customers); Processes (delivery of goods, services to customers need to be

done well, and customers are ready to return to use the products and services of the company);

Physical Evidence (what the customer receives must have a “physical” attribute, whether that

is a service or a product, i.e. with the insurance service, the customer still needs to get back the

insurance contract, manual, document…); Performance (this P represents the goal that the

business should aim for in order to bring its core values and real benefits to customers).

2.3.3. Theory of buyer behaviour

The theory of buyer behaviour was first introduced by Howard in 1963 as a consumer

decision model. The model was developed by Howard and Sheth (1969) and aims to provide

“a sophisticated integration of various social, psychological and marketing influences on

consumer choice into a coherent sequence of information processing” (Foxall 1990, p. 10). To

fully reflect the factors influencing buyers’ behaviours, Loudon and Della Bitta (1993) present

the theory and model of buyer behaviour in detail as shown in the diagram below: