Survivability of Micro-enterprises during the Pandemic Crisis
Noor Fzlinda Fabeil1*, Khairul Hanim Pazim1, Juliana Langgat1
1 The Faculty of Business, Economics and Accountancy, Universiti Malaysia Sabah, Kota Kinabalu, Sabah, Malaysia
*Corresponding Author: [email protected]
Accepted: 15 December 2020 | Published: 28 December 2020
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Abstract: The Covid-19 pandemic crisis has been viewed by many scholars as a 'sudden threat', to the global socio-economy. In Malaysia, the movement control order (MCO) has significantly disrupted the small businesses, especially the micro-enterprises, which are more financially-fragile than the larger counterparts. Micro-enterprise is the prime contributor to economic development, thus business survival strategy during a crisis is critical for this enterprise to endure in a new normal way of doing business. However, little is known about the survival approaches in which micro-enterprises respond during the pandemic crisis. This study explores the business survival strategy of 60 micro-entrepreneurs in Sabah during five phases of movement control orders in Malaysia. The results of structured questionnaires provide insights that micro-enterprises experienced a relatively severe impact of pandemic crisis than natural disasters, terrorist attacks, or political crises. It is found that most micro- entrepreneurs opt for online business as the main business survival approach during MCO.
The majority of respondents perceived themselves as well-prepared for crisis though able to sustain only for 3-5 months of a crisis duration. This study hopes to provide insights on business survival approaches and the appropriate business supports for micro-enterprises during a crisis.
Keywords: micro-enterprises, business survival, pandemic crisis
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1. Introduction
The novel coronavirus disease (Covid-19) outbreak has been categorised as a pandemic by the World Health Organization (WHO, 2019) since December 2019. It is recorded by many scholars as a disease with the highest infection and death rates compared to other respiratory infections like SARS-CoV, MERS-CoV, and Influenza (Peeri, et al, 2020; Liu, et al, 2020).
The pandemic crisis evidently can be regarded as a 'sudden threat' (Booth, 1993), as it affects not only the entire society and business organisation, but also the whole sectors of the economy.
In many countries, quarantine or emergency orders have been imposed by the government to prevent the spread of Covid-19. In Malaysia, for example, the movement control orders (MCO) have been extended towards the end of the year since March 2020. It has been reported that throughout the MCO, several important business sectors, especially agriculture, services, and tourism are disrupted due to limited operating hours and closure of supply chain, and temporary layoffs (Department of Statistics Malaysia, 2020). Micro-entrepreneurs, for instance, experience declining in cash reserves due to the loss of customers and restricted delivery channels during the MCO (Aling, 2020; Dzulkifli, 2020).
It is often argued that micro-enterprises encounter higher rates of discontinuance or failure compared with larger firms (Sapienza, 1991; Hall & Wahab, 2007) and in fact, they are more sensitive to crisis due to financially-fragile (Bartik, et al, 2020). Studies on business survival among micro-enterprises during a crisis have not been fully explored (Karadag, 2017; Utomo, 2020). Many previous studies on firm survival are limited to large-scale businesses (e.g. Crick
& Crick, 2020; Kepenach, 2007) and most studies on crisis management have been focused on managerial problems (e.g. Singh & Mitchell, 1996), natural disaster (e.g. Flynn, 2007, Bresciani, et al, 2002), economic recession (Devece, Ortiz & Armengot, 2016) and national security issues (Cook, 2015; Bosimin & Chan, 2018).
It is believed that there are considerable differences in how sensitive companies are to an emerging crisis like the pandemic, as the level of severity of the impact is influenced by firm size, resources, and locality. The business survival of micro-enterprises in a less developed area during the pandemic crisis must therefore be studied, as the progress of micro-enterprises in a less developed area may not advance in the same way as large enterprises in developed areas.
This study aims to explore from the micro-entrepreneurs’ experience in Kota Belud, Sabah, the impacts of the pandemic crisis on business operation, the business survival strategies employed, and types of supports needed to thrive during the early fifth phases of MCO
2. Literature Review
Many previous studies on business survival among small enterprises have been focused on the influence of person-related factors like motivation (e.g. Praag, 2003; Marti, Porcar & Tur, 2015) and demographic (e.g. Kalleberg & Leicht, 2017) towards business success. Little empirical evidence provides insight into an entrepreneur's experience to survive in a business during a crisis. Besides, there is still a lack of literature on the impact of an emergent crisis like the Covid-19 disease on survival strategy among micro-enterprises. This paper emphasises that the impact of a pandemic crisis on a micro-enterprise should be of great concern to scholars as smaller enterprises tend to grow relatively slower than the larger enterprises during a crisis (Bartz & Winkler, 2016) and may fail to survive within three years after a crisis strike (Cook, 2015).
Quarantelli, Lagadec and Boin (2007) propose the importance of managing an organisation during a crisis through a proper survival strategy. They define business survival strategy as contingency approaches used in dealing with a crisis. McCarthy (2003) in his study on the readiness of entrepreneurial firms toward crisis contend that owner-manager who have experienced managerial difficulties or business pressures (e.g. market, technology, society/political pressures) tends to make rational decision to face the unforeseen crisis in the future. To survive during a crisis, entrepreneurs embrace several survival tactics, for example through cost/price-based strategy (Naidoo, 2010), network-based strategy (Yu-Lian, 2008), and product differentiation (Bourletidis & Triantafyllopoulos, 2014).
A crisis is defined as a condition faced by an individual, community or organisation which they are unable to survive as they used before during their normal routine life (Booth, 1993; Cook, 2015; Pursiainen, 2018). Many scholars found that owner-managers exhibit significant survival strategy throughout the crisis phases, starting from respond, resume, recover, and restore phase.
(Pursiainen, 2018; Cook, 2015). These phases is used in the current study to discuss the impact of the pandemic crisis on business operation during the five phases of MCO in Malaysia, started from 18 March until 9 June 2020.
3. Methodology
This paper is a preliminary study of the overall research project under a special research grant for Covid-19, sponsored by Universiti Malaysia Sabah (UMS). The essence of the study is to gather entrepreneurs' point of view based on their experience when operating business during the pandemic crisis. The data were gathered through a structured questionnaire which was distributed online via Google Forms. The samples, who are among micro-entrepreneurs were approached purposively through two key informants, who are also the leader of an entrepreneur association in Kota Belud. The linking address of the Google Forms was shared by the key informants to the respective entrepreneurs whom they believed to be able to provide significant information stated in the research aims.
This study took place in June 2020, which covered several earlier phases of MCO in Malaysia, i.e. phase 1 (18th – 31st March 2020) until phase 5 (13th May – 9th June 2020). Purposive sampling was used in this study as it supports the principle of parsimonious, which allows convenience, and more objectivity rather than excessive (Aarts, 2007). The questions included dichotomous and attitudinal of a 5-point Likert-scale ranging from 1 (insignificant) to 5 (severe). The level of crisis impact has been measured in many previous studies using a 4 to 6 point Likert scale, for example, Fabeil, et al (2019) measured the impact of the earthquake on a business operation based on a 4 Likert scale from 1(not at all) to 4 (very disruptive) and Sato (2000) measured the level of the economic crisis on small businesses based on 6 points Likert scale starting from 1 (highly positive) to 6 (extremely negative). Data were analysed using the descriptive analysis to explore how the pandemic crisis affects micro-enterprises in terms of (i) the level of impact of the MCO on business operation, (ii) the survival strategy employed by micro-entrepreneurs to respond to the crisis, and (iii) critical supports needed during a crisis.
4. Results
Profile of Respondents
Table 1 shows the descriptive analysis of the respondents' profile. This study involves 60 micro-entrepreneurs, with 81.4 percent are female, almost half are within the age bracket of 30 to 39 (47 percent). Half of the respondents finished secondary school, followed by one-third of them possessed a training certificate. More than half of respondents receive a monthly income of RM 2,000 and less from the business, followed by 23.6 percent of them with income between RM 2,0001 to RM 4,000. The majority of them employ more than five workers in their business (85.8 percent), while half of the proportion of the respondents reported having no workers.
Table 1: Profile of Respondents (n=60)
Profiles n %
Gender Female 49 81.4
Male 11 18.6
Age 29 and below 8 14
30 - 39 28 47
40 - 49 14 23
50 and above 10 17
Education Secondary 30 50
Certificate 10 16.7
Diploma/Degree 20 33.3 Income RM 2,000 and less 31 56.4 RM 2,0001 – RM 4,000 13 23.6 RM 4,0001 and more 11 20 Number of
workers
No workers 24 42.9
1 – 5 24 42.9
6 – 10 6 10.7
More than 10 2 3.6
Impact of Pandemic Crisis on Micro-Enterprises
Mainly respondents viewed that the pandemic crisis has imposed a severe impact to their business compared to other types of crises that they have experienced before, for example, floods, earthquakes, land intrusions, and economic downturns. Figure 1 shows that the pandemic crisis reported to have the largest mean impact (Mean=4.64) among the other crisis types, namely natural disaster (Mean=3.90), security crisis (Mean=3.60), and politic and economic instability (Mean=3.93).
Figure 1: Level of Impact by Types of Crises (n=60)
Figure 2 presents the level of impact of pandemic crises on business operations. During MCO, 68 percent of the respondents experienced a severe impact on business operation in terms of loss of income (mean=4.46), followed by a reduction in cash reserve (62 percent, mean=4.43) and loss of regular customer (43 percent, mean=4.39). This result indicates that delays in cash income continue to be one of the most significant challenges for the survival of micro- enterprises during a crisis (Sato, 2000). The least impact was given to product damage (38 percent) and the layoff of workers (37 percent), which indicates that micro-entrepreneurs have less affected by this production-based problem due to its small size as compared to larger enterprises. It is believed that due to its smaller size and limited resources, micro-entrepreneurs tend to be highly organised and resourceful in managing the business (Drucker 1985).
Figure 2: The Level of Impact of Pandemic Crisis on Business Operation (n=60) 44
8 5 1 0
19 18
13
4 1
13
17 18
4 2
22
14 13
5 1
0 5 10 15 20 25 30 35 40 45 50
Severe Major Moderate Minor Insignificant
Pandemic Outbreak Natural Disaster Security Issue Politic/Economy Instability
68%
37%
38%
43%
52%
62%
15%
13%
20%
20%
23%
17%
10%
18%
18%
10%
13%
12%
12%
6%
3%
10%
10%
3%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Loss in Income Mass layoffs Product damage Loss of customer Supply chain desruption Reduce in cash reserve
Severe Major Moderate Minor Insignificant
Business Survival during a Crisis
Figure 3 illustrates how the pandemic crisis affected the business operation of micro- enterprises surveyed. Respondents are required to indicate their business operation hours throughout the five phases of movement control order starting from the MCO (Phase 1 to Phase 4) and Conditional MCO (Phase 5). It is found that between two-thirds and three-quarters of all respondents stated that their business was fully closed during phase 1 and 2 of the MCO.
This is logic due to standard operating procedures set out by the government for all services sector, including the business operating hours which was limited to 8 to 10 hours and only essential services are allowed to operate until 6.00 pm during the MCO period (Dewan Bandaraya Kota Kinabalu, 2020). Interestingly, a greater proportion of the respondents stated that they open their business half-day during Phase 4 of MCO and started to open their business as usual towards the later phase. This shows that micro-entrepreneurs started to survive in their business as the government released several restrictions during the recovery phase of Covid- 19.
Figure 3: Business Operation During Movement Control Order amid Covid-19 (n=60)
Table 2 reveals the readiness and survivability of micro-enterprises in the presence of a pandemic crisis. More than one-third of the respondents (38.3 percent, mean=3.39) are quite ambivalent in terms of their readiness to prepare for a crisis management plan. Almost two- thirds (65 percent) perceived that their business can remain alive for not more than 5 months if the pandemic crisis (i.e. Covid-19) prolonged.
Table 2: Readiness and Survivability of Micro-enterprises during Pandemic Crisis (n=60)
n %
Readiness to crisis
Strongly agree 7 11.7
Agree 20 33.3
Neutral 23 38.3
Disagree 7 11.7
Strongly disagree 3 5
Survivability of business
2 month and less 18 30
3 to 5 months 21 35
6 to 8 months 10 16.7 More than 8 months 11 18.3
78.3 65 50 16.6
15
3.33 15 23.3 40
21.6
13.3 18.3 23.3 26.6
23.3
5 1.6 3.3 16.6 40
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Phase 1 (18-31 March) Phase 2 (1-14 April) Phase 3 (15-28 April) Phase 4 (29 Apr-12 May) Phase 5 (13 May-9 June)
Fully closed Half-day Open until 6pm Open as usual
Nevertheless, it is interesting to find that entrepreneurs managed to take up several alternative approaches to survive their business during a crisis. Figure 4 illustrates suitable focus strategies perceived by micro-entrepreneurs as suitable to be employed in their businesses during a crisis.
Respondents were asked to rate the level of suitability on four types of Porter's generic strategies (Porter, 1985), namely market focus, product focus, cost/price focus, and supply chain focus. Respondents are focused more on satisfying the customer’s current needs by offering emerging products during the pandemic outbreak (e.g. essential foods, cleaning, and sanitary products) than focusing on the cost/pricing and supply chain.
Figure 4: Focus Strategies Suitable during a Crisis (n=60)
Figure 5 shows business survival approaches undertaken by entrepreneurs to deal with the impact of the pandemic crisis. More than three-quarters (78 percent) of the respondents opt for an online business for example selling their product via e-bazaar on Facebook Page, promoting and receiving orders via Mobile Apps like WhatsApp and other e-hailing applications. Besides, some respondents make collaboration with other entrepreneurs through association, in terms of sharing of market information, marketing, and product delivery. Crick and Crick (2020) suggest that forming alliances with other entrepreneurs or rivals in a pandemic crisis can positively affect company performance.
Figure 5: Business Survival Strategies during Pandemic Crisis (n=60)
Supports Needed during a Crisis
In relating to types of supports needed by micro-enterprises during the pandemic crisis, Figure 6 shows that respondents mainly viewed monetary support, assistance from local leaders and agencies as well as training on digital business as important to reduce the impact of the crisis.
32 28 22 21
15 17 16
18
10 11 15
13
2 2 3
3
0 0 2
0
Customer/Market Focus Product Focus Cost/Price Focus Supply Chain Focus
Highly suitable Partly suitable Fair Low suitable Not suitable
78 73 72 60 40
38
Opt for Online Business Team up with other entrepreneurs Self-delivery/ COD Business from home Reduce employee wages Use private runner
This result suggests that the government’s economic stimulus fund and the upskilling initiatives should be adequately provided to micro-enterprises.
Figure 6: Supports Needed by Micro-enterprises during Pandemic Crisis (n=60)
4. Conclusion
This study discusses findings from structured questionnaires with 60 micro-entrepreneurs in Kota Belud, Sabah. The study was conducted in mid of June 2020, during the conditional movement control order (CMCO) amid Covid-10 outbreaks in Malaysia. The study emphasises three main objectives, i.e. (i) the level of impact of the pandemic crisis on micro-enterprises, (ii) the business survival of micro-enterprises during the pandemic crisis, and (iii) the supports needed by micro-enterprises during a crisis. In relating to business survival strategy, this study suggests that micro-entrepreneurs exhibit ‘adaptive’ as well as ‘aided’ business models (Ritter
& Pedersen, 2020). The adaptive strategy suggests that some micro-enterprises need to change in light of a crisis, for example, to produce the product that is urgent to the market and to shift from conventional to online business. Besides, the aided strategy proposes that micro- entrepreneurs might rely on external support, from the government and other stakeholders in the supply chain to support them during a crisis. This study also provides insights that although pandemic crisis poses severe impact on micro-enterprises, entrepreneurs are capable to take generic approaches to managing the impact on their business. Scholars suggest that entrepreneurs tend to be more rational in the presence of attacks and crises by employing appropriate survival strategies to continue to exist in the business (McCarthy, 2003; Ritchie, 2004). Focusing on the customers, networking with other entrepreneurs, and digitalising the business are seen as suitable and rational tactics for micro-entrepreneurs in this study to survive during the pandemic crisis. This finding is parallel to Obrenovic, et al (2020), explained by their proposed model of enterprise effectiveness and sustainability during a pandemic. This study is limited in that it employs descriptive analysis on small scale survey. Notwithstanding, the results provide preliminary insights into the literature relating to business survival among micro-enterprises in Malaysia, particularly in a rural area, during a pandemic crisis, i.e. Covid- 19. Further analysis using relationship tests with a larger group of respondents is required in future studies to see the holistic views of the impact of the pandemic crisis on micro-enterprises in Malaysia.
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