Msmes In Medan City During the New Normal
Yeni ABSAH
1*, Isfenti SADALIA
2, Tetty YULIATY
3, Rico Nur ILHAM
41,2,3Faculty of Economics and Business, Universitas Sumatera Utara,
4Faculty of Economics and Business, Universitas Malikussaleh
Email: [email protected]1, [email protected]2, [email protected]3, [email protected]4
*Corresponding Author
Received: 07.04.2022 Accepted: 11.08.2022 Published: 07.02.2023 DOI: 10.47750/QAS/24.193.36
Abstract
The coronavirus (COVID-19) outbreak has terribly affected economic conditions in Medan City. One of the most considerably affected sectors by the COVID-19 outbreak is micro, small, and medium enterprises (MSMEs). This article aims to assess the impact of the COVID-19 outbreak on this business and provide policy recommendations to assist MSMEs in reducing business losses and surviving through the crisis. MSMEs are sectors of a significant role for regional economic growth. MSMEs contribute to the absorption of labour and the distribution of development results. In the current New Normal period, MSME business owners must have a surefire strategy for their business to survive and maintain continuity through various innovations. This research aims to develop MSME business strategies in the New Normal period to survive and maintain their business continuity. The data collection is done by identifying MSME obstacles by conducting surveys by distributing questionnaires, literature studies, and FGD with MSME observers in Medan. The final stage is concluded with the formulation of a strategy to be implemented by MSMEs to maintain the sustainability of MSMEs in Medan City in the New Normal period.
Keyword: MSMEs, Business Strategy, New Normal, COVID-19.
Introduction
The outbreak of coronavirus (COVID-19) has terribly impacted the national and global economy. Different companies face different problems below a certain level of loss. Companies face multiple problems such as falling demand, supply chain disruptions, cancelled export orders, shortages of raw materials, and transportation disruptions.
According to Prasad et al., (2015); Susilawati et al., (2020., 2020), the COVID-19 outbreak has caused disruptions to the global supply chain, and, thus, MSMEs are severely affected by the COVID-19 outbreak.
MSMEs face various problems related to cash flow, acquisition of raw materials, and declining market demand (Lu et al., 2020). Cash flow is one of the most important non- human assets of MSMEs that the government needs to attend to (Jindrichovska, 2014). Furthermore, pandemic status led to limited transportation access between provinces which significantly hampered the raw material value chain (Lu et al., 2020). Similarly, government policies to anticipate the Covid-19 pandemic that require people to remain at home largely reduce economic activity and reduce severe pressure on demands (Lu et al., 2020).
Micro, small, and medium enterprises (MSMEs) play a strategic role in national development as a driver of economic growth, exports, and innovation (Putra, 2016). Indonesia needs to focus on developing MSMEs because they are crucial to the national economy (Pakpahan, 2020). The systematic development of MSMEs towards high performance depends on the quality of available resources. Generally, MSMEs must face tough competition due to their limited access to market information and need to overcome resource constraints. Due to
lack of resources and poor innovation capabilities, MSMEs face many obstacles. To stay competitive, they must compare their best assets, processes, and performance in the industry (Singh et al., 2008). In addition, MSMEs can also switch by utilizing digital marketing. Cenamor et al. (2019) found that entrepreneurial SMEs may benefit from an exploration orientation when pursuing digitalization.
MSMEs must design and execute various strategies to survive. For example, collaboration or cooperation between MSMEs and large companies is an effective way to grow a business, as both parties can increase profits (Widjajanti, 2015;
Felzensztein et al., 2012), ensuring collaboration with government stakeholders, business entities, and the education world. By applying the operational principles of effective supply chain management and strategic positioning in the value chain, MSMEs can be guided to achieve high performance and thus gain a special competitive advantage to survive or even lead in this pandemic crisis (Fahriyah &Yoseph, 2020).
The COVID-19 pandemic has led to changes and shifts in consumer purchasing patterns (Irawanto et al., 2021). Despite the presence of online sales, consumers often still buy products directly at the store or mall they want to go to.
However, with the current government restrictions and regulations to stay at home, consumers are discouraged from lingering outdoors. According to (Utomo et al., 2021), responsive digital marketing proved beneficial for MSMEs in maintaining their sales performance during the covid-19 pandemic.
This research is motivated by the business conditions in the era of the COVID-19 pandemic or what is called the New Normal which is experiencing significant obstacles compared to before, and not a few business actors who experience
losses that make it difficult to maintain their business. What is the most appropriate strategy for MSME businesspeople to do in a new normal situation?
Literature Review
The criteria of Small and Medium Micro Enterprises have been regulated in the legal system. According to Senderovitz (2009) the definitions of small firms/SMEs can be categorized in mainly quantitative and mainly qualitative definitions. The most common criteria for measuring size in the applied definitions are "number of employees" and "annual sales".
According to De Soto, 2000, micro-businesses and SMEs are the most important part of the industrial community in any country. Three approaches can be used in to foster small industries: (1) non-policy approach: this approach focuses on industries moving on a lower spectrum (marginal activity). (2) Protection approach: in large-scale industries, protection policies generally include restrictions on producing certain goods, import restrictions on replacement products, and control of the spread of technological innovations that can cause shocks for small industries. (3) Stimulation approach: this type of policy focuses more on supply in the form of lending, provision of raw materials and production equipment, as well as the implementation of courses.
MSMEs are still dominated by the government, namely sector-based development that has not been integrated (Hidayat et al., 2018). Since then, the government established the Cooperative and Business Resource Development Agency (also called BPS-KPKM or Cooperative Resource Development and Small and Medium Enterprises Agency) with the task of developing micro and small businesses and cooperative resources (also called SMEs - Small and Medium Enterprises and Cooperatives). BPS-KPKM must seek breakthroughs to engage efficiently and effectively to aid economic recovery. This strategy was chosen due to its supposedly focused, efficient nature, and accelerated change function relied on meeting expectations. Collaborative measures involving MSMEs and large companies, public and private support institutions, and local governments, will all provide opportunities to develop certain local advantages and corporate competitiveness from clusters (Handoko, 2017;
Hidayat et al., 2018; Suarniki et al., 2019).
MSMEs owners and their employees began to utilize the online marketplace to market their products and increase their revenue. According to Kotler and Keller (2016), marketing is an organizational function and a series of processes for creating, communicating, and managing consumer relationships in a way that benefits the organization and its stakeholders.
Therefore, the existence of the market can establish a relationship between consumers and producers. Online marketing is perfect for the current Covid-19 pandemic conditions. The government's policy of banning crowds in offline markets is an ideal move to an online marketplace to reach all consumers without masses. The online market use inevitably concerns technology.
To survive the Covid-19 pandemic, MSMEs must be able to understand the opportunities and challenges. Furthermore, to answer such challenges and opportunities MSMEs need to develop strategies. One of the strategies currently used by MSMEs is using the social media. Social media is a fresh and more flexible way to do business and can change the way companies function and transform companies themselves.
Social media is increasingly being used throughout the organization and will keep spreading. As a result, some types of organizations have understood the importance of embracing social media, regardless of their size and operation. Such an adoption generates huge benefits for businesses in areas such as advertising, promotion, branding, and marketing, customer feedback, market research, product development, and word of mouth promotion (Ainin et al., 2015). This benefit is no longer only aimed at large organizations (He et al., 2014) because social media is relevant for MSMEs (Meske & Stieglitz, (2013).
Methodology
This type of research is qualitative research with descriptive analysis. The data sources in this study are primary and secondary data. The sample in this study was 107 MSMEs in Medan City. The data was collected through FGD and by distributing questionnaires to MSME owners in Medan City.
Result And Discussions Respondent's Identity Gender
Table 4.1 presents the results of gender.
Gender Percentage
(%)
Frequency (f)
Male 31 33
Female 69 74
100 107
Table 4.1 Gender of Respondents
The results in Table 4. 1 showed that the number of MSMEs in Medan city was 74 female respondents or 69%
more than the male ones of 33 respondents or 31%. This data shows that MSME owners in Medan city are more dominant in
female than male, which is relevant to the research by (Akuoko et al., 2021) which states that 40% percent of these MSME are women-led and that these women are breadwinners of their homes.
Type of Business
Table 4.2 presents the results of the type of business.
Type of Business
Percentage (%)
Frequency (f)
Electronics and Gadgets 0% 0
Automotive 0% 0
Salon 2% 2
Trade 2% 2
Education 2% 2
Internet Technology 3% 3
Handicraft 4% 4
Agrobusiness 5% 5
Fashion 12% 13
Others 20% 21
Culinary 50% 55
100% 107
Table 4.2 Types of Business
The results in table 4.2 provide information that the most dominant type of MSME business in Medan city is culinary with 55 people or 50%, other types of businesses are 21 people or 20%, fashion are 13 people or 12%, agrobusiness are 5 people or 5%, handicraft are 4 people or 4%, internet technology are 3 people or 3%, education, trade, and salon are 2 people or 2%, and automotive, electronics, and gadgets are 0 people or 0%.
This data shows that the type of business of MSMEs in Medan
city are dominated by culinary businesses.
MSMES
Turnover of MSMES
Table 4.3 presents the results of business turnover.
How is your current business turnover? Percentage Frequency
Up 1% 1
Stable 8% 9
Down 91% 97
100% 107
Table 4.3 Turnover of MSMES.
The results in table 4.3 shows that 91% of business turnover fell, 8% business turnover was stable, and 1%
business turnover rose. This shows that Micro Small and Medium Enterprises (MSMEs) are depressed by the impact of COVID-19 which causes their turnover to fall by 91%. Various activity restriction policies taken by the government to suppress Covid-19 transmission require MSMEs to act creatively and
innovatively so that turnover remains stable.
Number of employees
Table 4.4 presents the results of the number of employees.
Have you reduced the number of employees? Percentage Frequency
No 37% 40
Yes 63% 67
100% 107
Table 4.4 Number of Employees
Table 4.4 shows that 63% reduced employees, and 37%
did not. This shows that the COVID-19 pandemic has caused MSMEs in Medan city to reduce their headcount. This action is certainly a difficult decision taken by MSME actors. The reason
for reducing employees is generally due to declining sales turnover. There is a change in consumer behaviour in the decrease in the number of buyers and changes in the frequency of public spending. Consumers still buy for a normal
amount or less.
Online Sales
Table 4.5 presents the results of online sales.
Are you currently doing online marketing? Percentage Frequency
No 20% 21
Yes 80% 86
100% 107
. Table 4.5 Online Sales
The results in Table 4.5 provide information that 80% of MSMEs in Medan City making online sales and 20% have not.
This shows that the COVID-19 pandemic has challenged and accelerated the utilization of social media in doing business.
Social media is ideal for MSMEs due to low cost and minimal technical requirements (Ferrer et al., 2012). Social media offers benefits for MSMEs to increase marketing and sales, expand market share, and help make business decisions (Priambada, 2015). As a step in supporting these benefits, MSMEs began to adopt social media to support their performance to increase sales. Digital technology has a significant influence on the smooth running of MSMEs during the covid-19 pandemic. In response to competitive pressure, many entrepreneurial SMEs use digital platforms to leverage their business strategy (Li, 2016). The quality of production and product capacity need
attending to improve digital MSMEs (Arianto, 2020).
It is necessary to do intensive training regarding digital marketing because the competencies of MSME owners is a determinant. Cenamor et al. (2019) state that an SME's performance improvements resulting from digital platforms depend on the SME's capabilities. Specifically, SMEs can develop a digital platform capability, which enhances network capability, to increase performance.
Role of government
Table 4.6 presents the results of the role of government.
What business assistance is most important for
the government to provide? Percentage Frequency
Delaying installments 0% 0
Financial Training 0% 0
Business license help 1% 1
Online sales facilities 3% 3
Online business training 4% 4
Tax cost removal 5% 5
Improved business assistance 15% 16
Business facilities assistance 15% 16
Financial incentive assistance 57% 62
100% 107
Table 4.6 Role of Government
Based on the results in Table 4.6, the most important role of government is to provide financial incentives to help businesses, which was stated by 62 respondents or 57%, followed by 16 respondents or 15% stated that the government provided business facilities assistance and business assistance, 5 respondents or 5% stated that the government eliminated tax costs to help businesses, 4 respondents or 4%
stated that the government conducted online business training, 3 respondents or 3% said the government provided online sales facilities to help businesses, 1 respondent or 1% said the government facilitated business licenses to help businesses, and no respondents stated the government delayed installments and financial training to help businesses. This shows that beside providing business financial incentive assistance, MSMEs also hope the government will continue to provide non-financial assistance in the form of business license
assistance, training, and installment payment delays. MSMEs hope the government plays a greater role to help to survive this crisis. MSMEs in Medan city need: 1. appropriate financial incentive assistance because the current funding assistance has not been helpful enough, 2. business facilities, 3. business assistance, 4. business promotion assistance, 5. marketing assistance through Whatsapp, Market place, Facebook and Instagram, 6. forming a business community, and 7. obtaining training: marketing (online promotion), business management, product innovation and finance.
MSME Community
Table 4.7 presents the results of the MSME community.
How important do you think it is to join
the business community? Percentage Frequency
Less important 4% 4
Not important 12% 13
Very important 84% 90
100% 107
Table 4.7 MSME community
Table 4.7 shows that out of 107 respondents, 90 respondents (84%) stated that joining the business community is very important, 13 respondents (12%) stated it is not important to join the business community, and 4 respondents (4%) stated it was less important to join the business community. This shows that most respondents consider joining the business community to have a positive impact on their business. Joining the community will enable business owners to build a business network. Activities in the business community generally begin with the potential of each community member which is then continued with hard skills and soft skills training, transferring knowledge and information through the community, building a value chain for production, and evaluating and monitoring MSMEs.
Conclusion
The coronavirus (Covid-19) pandemic outbreak has had at least three impacts on the economy: the decline in economic growth, the increase in unemployment, and the increase in the number of poverty. The government must immediately prepare recovery programs and policies quickly and appropriately. The outbreak of the Covid-19 pandemic puts pressure on the economy, both in terms of demand and supply, when all indicators signal economic weakness. Thus, it is expected that the economic sector will slowly grow while considering the strict health protocols. Beside strengthening the economic sector, the Medan City Government is also expected to improve and strengthen the health sector to anticipate the soaring number of covid-19 patients, reinforced by the public opinion that the Medan City Government must still prioritize the health sector.
Utilization of technology in marketing is crucial for MSMEs, but it takes the readiness of MSMEs to switch to digital marketing, as stated by Giotopoulos et al. (2017) that innovation and R&D activities and collaborations, well- educated and skilled workers, decentralized decision-making and visionary leadership increase the likelihood of adopting new technologies in SMEs.
Recommendations for strengthening MSMEs in Medan while adhering to strict health protocols are for the business owners to: MSME actively participate in various creative entrepreneurial training and certified skills training provided by the Medan City Government and other organizations and carry out regular disinfectant spraying at their business locations, actively participate in the successful movement of covid-free traders by further activating the merchant association, utilize online marketing media to increase market share carry out various innovations such as product innovation and marketing techniques that are tailored to current conditions and consumer needs.
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