Role of Innovative Marketing Strategy for Success of Micro, Small, and Medium Enterprises (MSMEs)

Abstract

Large firms are a threat to small businesses in all countries (Wanninayake and Chovancova 2013). “The Government of Sri Lanka recognizes MSMEs as the back bone of the economy” (Gunawardana 2016, p. 3). MSMEs in Sri Lanka have been struggling to compete with other firms (Vijayakumar 2013; Gajanayake 2010). In addition, the postwar environment of Sri Lanka contains huge problems and chal lenges (Shivany et al. 2015). “In 1983, 98% of MSMEs accounted for 48.6% of total employment and 31.1% of value added. In 2008, 93% of MSMEs accounted for 29.6% total employment and 20.3% of value added, this evidence clearly shows clearly the poor development of MSMEs” (Vijayakumar 2013, p. 41). Even though MSMEs have accounted for a vast percentage of establishments in Sri Lanka, their contribution to the economy is very low (Vijayakumar 2013). Earlier studies empha sized that MSMEs in Sri Lanka have been struggling to compete with nationally and internationally branded products (Vijayakumar 2013; Gajanayake 2010; Pushpakumari and Watanabe 2009). “Soon after the war, local productions were subjected to a market shock as road connectivity resumed to the wider market with far more advanced production” (Sivatheepan et al. 2018, p. 9). Most of the MSMEs were collapsed and destroyed by internal war while the remaining enterprises in Sri Lanka were vulnerable (Sivatheepan et al. 2018). MSMEs in the Northern Province have not been well developed and have thus diminished over 10 years. MSMEs make a vital contribution to GDP in Sri Lanka. In the Northern Province, more than 99% of enterprises are MSMEs. The growth rates of GDP contribution from the Northern Province were 9% in 2011, 0% in 2012, −8% in 2013, 15% in 2014, 5% in 2015, 10% in 2016, and 0% in 2017 (Central Bank Report 2015, 2018). These numbers display the fluctuating trend of GDP contribution from the NP. This trend also indicates the poor condition of MSMEs in the Northern Province. The marketing strategy plays an important role in every organization. The mar keting of goods or services is the ultimate objective and goal of all types of organi zations (Baker and Hart 2008; Kotler et al. 1999). Marketing strategy has been becoming a popular concept among institutions to improve their organization per formances (Baker and Hart 2008; Hunt 2017). The application of a marketing strat egy allows for the better management of environmental challenges and result in superior performance, sustainable growth, and the development of the organizations themselves (Baker and Hart 2008; Kotler et al. 1999; Hunt 2017). Resource advan tage theory of competition explains that marketing strategy is an intangible resource to firms and superior financial performance is achieved by the application of supe rior marketing strategy (Hunt and Morgan 1995; Hunt 2013; Hunt et al. 2006). MSMEs have limited finance, human, information, and organizational resources (Baker and Hart 2008; O’Dwyer et al. 2009a, b, c). Due to these characteristics, MSMEs cannot apply the common and conventional strategies used by most other f irms (Gilmore et al. 2001; Quaye and Mensah 2019). Innovative marketing strategy is the effective specific marketing strategy which was suggested for MSMEs (Carson and Gilmore 2000; Haddad et al. 2019). Even though the literature suggested inno vative marketing strategy and variables for MSMEs, they were not empirically tested for any MSMEs. Furthermore, these suggested variables were not tested for any MSMEs in the Sri Lankan context. As such, this research was initiated to study the current value of innovative marketing strategy to the MSMEs in Sri Lanka and to discover the extent to which innovative marketing strategy contributes to the suc cess of MSMEs in the country.