What Makes Entrepreneur Use Social Media Marketing

Prihatin Lumbanraja, Arlina Nurbaity Lubis

and Beby Kendida Hasibuan

Faculty of Economic and Business, Universitas Sumatera Utara, Medan, Indonesia

Keywords: Social Media Marketing, Human Factor, Market Attractiveness, Organic Referral, Entrepreneur

Abstrac: Micro, small and medium enterprises have become the main development wheels of a country. Unfortunately

many of these businesses do not last long with relatively low performance. Low performance makes the

business's attractiveness decrease. The main problems that often occur are problems in the scope of marketing

and financial behavior. This study aims to evaluate the influence of financial and marketing behavior in

driving the performance of MSMEs. A total of 300 SMEs participated in this study. Data were collected using

a research questionnaire. Data were evaluated using multiple linear regression analysis. This research shows

that currently the performance of MSMEs is only influenced by marketing activities. Financial behavior

cannot yet reflect improvements in MSME performance.

1 INTRODUCTION

Higher education has an important role in shaping the

younger generation by providing education to the

younger generation. Higher education is the center of

the young generation for today's adult society (Raval,

2006). Higher education institutions become the right

place in training and creating opportunities for

students to become professionals in the work

environment or encourage them to improve the

entrepreneurial aspect within the scope of objectives

after graduating from higher education. Badal and

Srinivasan (2011) state that people's entrepreneurial

intentions will decrease with age. To support this

statement, Gallup (2013) provides the GALLUP-

HOPE Index which emphasizes that the

entrepreneurial spirit must be nurtured and left early

so that they are ready to start a business or create

things that bring change to the world.

The level of open unemployment at the tertiary

level of graduates in Indonesia has increased from

August 2013 to August 2015 (BPS, 2017). In 2013

the open unemployment rate for university graduates

was 434 thousand and increased to 653 thousand in

2015. This figure indicates a significant increase in

unemployment from university graduates, especially

at the undergraduate level. Lumbanraja et al. (2018)

provides information that although there has been an

increased interest in entrepreneurship from

prospective college graduates, the majority of

prospective graduates still choose to find work rather

than opening their own jobs.

Kuswara represented the Ministry of Research,

Technology and Higher Education (2012)

increasingly aggressively promoting a curriculum

that builds an entrepreneurial spirit and

entrepreneurial skills from various universities. This

mission is related to the plan to create an

entrepreneurial campus. Higher education has an

important role in shaping the younger generation by

providing education to the younger generation.

Higher education institutions become the right place

to train and hone the potential of students either as

professionals or encourage them to build a business

through entrepreneurship as their future career. The

choice of career direction for students who have

completed their studies or graduated is only divided

into two main options, which are job seekers or job

creators. Higher education institutions are a means of

fostering the entrepreneurial abilities of the embryos

of young entrepreneurs so they can compete

competitively in the world of entrepreneurship. The

development of the industrial revolution 4.0 which

makes everything all-round internet (internet of

things) makes entrepreneurs need skills in utilizing

the access of the internet world for the benefit of

entrepreneurship. Duggan and Smith (2013) in their

research showed that two-thirds of cyberspace

communities are active in their social media, such as

YouTube, Facebook, Instagram, and LinkedIn. Alexa

(2015) shows Facebook's popularity among the world

658

Lumbanraja, P., Lubis, A. and Hasibuan, B.

What Makes Entrepreneur Use Social Media Marketing.

DOI: 10.5220/0009329306580664

In Proceedings of the 2nd Economics and Business International Conference (EBIC 2019) - Economics and Business in Industrial Revolution 4.0, pages 658-664

ISBN: 978-989-758-498-5

is very high, reaching the second position after

Google from the perspective of internet users. Beck

(2015) shows that social media platforms have

become targets of international marketers in

increasing demand for their products.

The use of advertising media through social

media provides many benefits for businesses, for

example increasing the effect of word of mouth from

the comments column and displaying items that will

not fade with time (Chu, 2011). Nair's research (2014)

shows that more than millions of marketers are active

in social media to drive demand for their products and

increase sales. This study seeks to identify factors that

encourage business actors, especially youthpreneur in

higher education to be active in the use of social

media as an advertising platform and evaluate their

impact on business performance.

Many of the business actors refuse to try to market

their products online, especially in paid platforms

because the mindset of young businesses towards

advertising is more directed towards costs than

investment. This study seeks to evaluate the basic

model that can foster the use of industry 4.0 for young

entrepreneurs to expand their markets. Specifically,

this study evaluates factors that influence the use of

advertising platforms on social media.

2 LITERATURE REVIEW

2.1 Entrepreneurship

Understanding entrepreneurship in the study of

literature is very diverse. Hunger and Wheelen (2015)

stated that entrepreneurship is in principle a capacity

for creative thinking and innovative behavior that is

used as a basis, resources, motivators, goals,

strategies / strategies, and tips in facing life's

challenges. Scarborough and Cornwall (2014) argue

that entrepreneurs are people who are able to create

new businesses, and people who are usually directly

confronted with risk are able to identify in achieving

success. Entrepreneur is able to identify various

agreements, and devote all the resources he has to

change the opportunity that is profitable.

Entrepreneurship in this sense is related to the ability

to create new businesses.

Entrepreneurship (entrepreneurship) is also

understood as the soul, spirit, attitude, behavior, and

potential ability of a person in handling businesses

and or activities that lead to efforts to find, create,

implement work methods, technology, and new

products by increasing efficiency in order to provide

services that it's better to get the maximum profit

(2012). Entrepreneurship in this case is a creativity

and innovation that is owned by someone to produce

added value for themselves and benefit others. In

essence, entrepreneurship is the nature,

characteristics, and character of someone who has the

will and ability to realize innovative ideas in the real

world (business) creatively and productively.

Someone who has the potential or entrepreneurial

spirit, he is able to see and assess business

opportunities, gather various resources needed to take

appropriate action and take advantage of business

opportunities.

Research by Lumbanraja et al. (2018) identified

that there is a synergy between the University,

Lecturer Staff, and Students in generating student

career direction in the future. The synergy encourages

students to become job creators or job seekers.

2.2 Social Media Exposure

Social media exposure is related to the intensity of

business actors in the use of social media. Marketers

through social media require active participation in

giving reviews and answering consumer questions

live in order to bind consumers' attention.

2.3 The Human Factor (Capabilities)

Robbins and Judge (2013) define capability as the

capacity of individuals to carry out various tasks in a

job. Every person has strengths and weaknesses in

terms of abilities that make him relatively superior or

inferior to other individuals in carrying out certain

tasks or activities. The capability in this study refers

to the ability of businesses to utilize social media

platforms as a means of advertising for young

entrepreneurs. This capability is evaluated based on

cognitive abilities and actualization abilities.

A person's capabilities play a big role in driving

performance. Krietner also divides that capabilities

are basically divided into two categories, namely

physical capabilities and cognitive capabilities. A

person's capability plays a dominant role in

encouraging individual performance. This shows that

someone who has the capability in acting will

properly carry out the tasks assigned to him. Thus,

young entrepreneurs who have advertising

capabilities will be able to market their products well

through social media platforms.

2.4 Market Aspect (Traffic)

The target of marketing by utilizing social media via

the internet is social media users or the platform, in

What Makes Entrepreneur Use Social Media Marketing

659

other words, traffic. Li and Kannan (2014) show that

there are various buyer characteristics in online store

traffic. Schlosser et al. (2006) states that a prospective

buyer will make security considerations sourced from

the type of ad traffic from the transaction partner.

Pauwels et al., (2016) provide three main categories

in evaluating traffic, namely:

a) Direct Traffic, refers to users who go directly to

social media sites by inputing a website address

or through a bookmark.

b) Referral Traffic, refers to users who go to the

destination of the website, for example through

Facebook ads directed to whatsapp media.

c) Organic traffic, refers to active users

independently searching for product

information through internet media before

consuming it.

3 RESEARCH METHOD

3.1 Research Time and Characteristics

This research was conducted by conducting a study

of SMEs in the city of Medan. The research location

is focused on several locations in the city of Medan

such as around Universities as most of youthpreneurs

were students, in the business area and other strategic

locations.

3.2 Participant

The unit of analysis in this study is young

entrepreneurs, especially alumni and students from

Higher Education in the City of Medan. The object of

analysis in this study is the perception and actions of

business actors in conducting business management

and the acquisition of the development they

experienced. Because there is no centralized data

from young entrepreneurs in the city of Medan, the

study population is an unidentified population. By

using sample rules on SEM and sample formulations

based on unidentified population, the sample of this

study was stabilized by 200 young entrepreneurs and

taken by non-probability sampling. Their consent

were taken to participate in this study.

3.3 Data Collection Method

Self-administered questionnaires were employed

during our research. The questionnaire in this study

was prepared based on a theoretical study and

adjusted to the MSME's condition that was the object

of research. Therefore, the research questionnaire

requires a validity and reliability test before it is

applied as an instrument for research data collection.

The validity and reliability testing of this instrument

was carried out on 30 MSMEs owners outside the

research sample later. Evaluation of the validity of the

questionnaire is done by face validity by adjusting the

list of questions raised with existing theories, as well

as the Pearson correlation which shows the

correlation value of the total score on each variable.

The instrument reliability test was conducted by

evaluating the Cronbach's alpha value on each

variable proposed in this study

3.4 Data Analysis Method

We employed multiple linear regression to evaluate

the impact of each aspect on its dependent variable,

Social Media Exposure.

4 RESULT AND DISCUSSION

4.1 Participants’ Characteristics

Characteristics of respondents by sex were carried out

to obtain the distribution of characteristics of business

operators in Medan City based on gender. In general,

Indonesia adheres to segregation where generally

men make a living and women take care of the

household. The results of tabulation of respondents

by sex are summarized in Table 1.

Table 1. Responden Based on Gender

Gende

of Sample %

Male 80 40,00

Female 120 60,00

Total 200 100,00

Table 1 provide information that the involvement

of women in the business environment (MSME) is

greater than the involvement of men as entrepreneurs.

This labor force participation indicates that the role of

women in the work environment has increased.

Women prefer entrepreneurship where they can

balance their time between household duties and

duties as an entrepreneur.

The majority of business operators in Medan City

are in the age range of 20 to 29 years (42.5%)

followed by ages 30 to 39 years (36.00%). This

indicates that the spirit of young entrepreneurs in the

city of Medan has begun to grow and increase the

participation of young people in the business

EBIC 2019 - Economics and Business International Conference 2019

660

environment. Some start this business by continuing

the family business, but many also start a business

from scratch.

the majority of business people have the last

education level achieved is high school, followed by

the level of Bachelor education (S1). This shows that

one of the factors that drives business actors is the

problem of education where the last education they

have is generally difficult to find work that can meet

family needs. At present it is very rare for companies

to accept employees with a high school education or

below. Nevertheless, participation of bachelor

graduates (S1) in the business environment itself has

improved.

4.2 Regression Model Evaluation

This research model uses two independent variables

and one dependent variable. The independent

variables used in this study are human aspect and

market aspect of MSMEs Business owner in Medan

City. The dependent variable of this study is the

Social Media Exposure which implemented by the

MSMEs. A total of2300 businesses participated in

this study.

4.2.1 Residual Normality Test

The normality test aims to find out whether the

intruder or residual variable regression model has a

normal distribution. Good data is data that has a

pattern like the shape of a bell on the histogram

diagram. The data normality test used in this study is

the Kolmogorov-Smirnov test. Criteria for testing one

sample using a one-sided test that is by comparing the

probability with a certain level of significance that is

if a significant value or probability <0.05, then the

distribution of data is not normal and if a significant

value or probability> 0.05, then the data is normally

distributed. Evaluation using graphs is used to

support statistical evaluation results.

Figure 1. Residual Histogram

Figure 1 provides information that in the

histogram graph, the distribution of residual data

leads to bell-shaped; in this case, the residual data can

be categorized as normally distributed. P-P plots are

applied to evaluate this situation more clearly.

Figure 2. Normal P-P Plot

Figure 2 shows that data residuals are spread

evenly along diagonal lines. This condition further

supports that data residuals are normally distributed.

This distribution was evaluated statistically and

summarized in Table 2

Table 2. Normality Test

Tests of Normality

Kolmogorov-Smirnov

Shapiro-Wil

Statisti

df Sig. Statisti

df Si

Unstandardize

d Residual

,038 200 ,200

,993 200

*. This is a lower bound of the true significance.

a. Lilliefors Significance Correction

What Makes Entrepreneur Use Social Media Marketing

661

Table 2 provides information that statistically, the

Kolmogorov-Smirnov and Shapiro-Wilk tests, give a

significance value> 0.05 which indicates that the data

residuals are normally distributed. Thus, the

assumption of normality in residual data has been

fulfilled.

4.2.2 Multicollinearity Test

Symptoms of multicollinearity can be seen from the

value of tolerance and VIF (Varⅰance Inflate Factor).

Both measures indicate the variables which are

strongly affecting other dependent variables.

Tolerance is to measure the variable variables of the

dependent variables which are not explained in terms

of the other variables. The value that is used for

Tolerance> 0.1 and VIF <5, then there is no

multicolon.

Table 3. Collinearity Analysis

Coefficients

Model Collinearity Statistics

Tolerance VIF

(Constant)

Human_Aspect ,991 1,009

Market_Aspect ,991 1,009

a. Dependent Variable: Social_Media_Exposure

Table 3 showed evidence that there is no problem

of multicollinearity of data on the independent

variables of the study. Each element of marketing

communication technology is independent so that the

variables proposed in this model do not affect each

other.

4.2.3 Heterokedasticity Test

Heterokedastity test data in this study were evaluated

using Glesjer-test statistical method. The result is

summarized as follow:

Table 4. Glesjer Test Analysis

Coefficients

Model Unstandardized

Coefficients

Standardized

Coefficients

t Sig. Collinearity

Statistics

B Std.

Error

Beta Tolerance VIF

(Constant) ,317 ,261 1,215 ,226

Human_Aspect ,020 ,055 ,026 ,360 ,720 ,991 1,009

Market_Aspect -,009 ,028 -,022 -,308 ,758 ,991 1,009

a. Dependent Variable: ABSRES

Table 4 indicates that there are no statistically

significant independent variables on the value of

absent data residuals. Thus statistically there are no

data heterocedasticity problems.

The research model has been evaluated qualitatively

based on classical assumptions. The model has

fulfilled the classical assumption criteria so that the

prediction results of this research model are best

linear unbiased estimators and can be used to evaluate

the conditions that occur in the research sample

4.2.4 Multiple Linear Regression Analysis

The results of the regression conducted in this study

are summarized as follows:

Table 5. Regression Result

Coefficients

Model Unstandardized

Coefficients

Standardized

Coefficients

t Sig. Collinearity

Statistics

B Std.

Erro

Beta Tolerance VIF

(Constant) ,059 ,450 ,131 ,896

Human_Aspec

,668 ,094 ,417 7,089 ,000 ,991 1,009

Market_Aspec

,289 ,049 ,349 5,924 ,000 ,991 1,009

a. Dependent Variable: Social_Media_Exposure

F Statistics = 47,126 (Sig <0,05)

Adjusted R Square = 0,317

Table 5 provides information that aspects of

human resources and aspects of market potential are

able to explain 31.7% of the state of social media

exposure from MSMEs. Thus, there are 68.3%

influences from outside the model currently

proposed. The significance level of the F-statistics on

the proposed model <0.05 which indicates that

together, aspects of human resources and market

potential play a role in influencing social media

exposure of MSMEs in Medan City.

Regression models that can be formulated based

on the results of this study are:

Y = 0,059 + 0,668 Human Aspect + 0,289 Market

Aspect + e

The aspect of human resources has a great

influence on social media exposure of entrepreneurs

with a beta value of 0.668 and a significance level

<0.05. Thus, there is sufficient evidence to state that

aspects of human resources have a positive and

significant effect on social media exposure of

business actors. The aspect of human resources is

related to the capabilities of a business actor in

implementing or using social media as marketing

media. This study provides empirical evidence that

the main factor in the use of social media is the ability

of businesses to use existing technology.

Aspects of market potential in this study have a

positive (B = 0.289) and significant (sig <0.05) effect

on social media exposure. In the proposed model this

effect is relatively smaller than the human resource

aspect but still influences the social media exposure.

Thus, there is enough evidence to state that the market

potential of the social media platform has a positive

and significant effect on the social media exposure of

MSMEs in the City of Medan. For every one unit

EBIC 2019 - Economics and Business International Conference 2019

662

increase that occurs from market potential, media

exposure will increase by 0.289 units. This market

potential aspect includes a review of the traffic that

will be obtained from business actors for the social

media marketing activities that it applies. The greater

the market potential that might be obtained, the

greater the level of social media exposure. Thus,

people are getting smarter in choosing social media

marketing platforms in optimizing their market

potential

5 CONCLUSIONS AND

SUGGESTIONS

The era of the industrial revolution makes the role of

e-commerce in the industry increasing. One form of

e-commerce that can be utilized by businesses is

social media marketing. This research indicates that

the intensity of the use of social media from

entrepreneurs depends on their perception of the

market potential of the platform and the ability of

businesses to use social media as marketing media.

The most dominant factor is the self capability to

operate the platform. Nevertheless, business people

are getting smarter in assessing the benefits of social

media marketing and starting to pay attention to the

traffic from the platform that can be obtained to

optimize the demand for their business.

ACKNOWLEDGMENTS

The authors gratefully acknowledge that the present

research is supported by Universitas Sumatera Utara.

The support is under the research grant TALENTA -

Penelitian Dasar for year 2019

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