Utilization of Social Media and Its Implications on the Performance of SMEs in Dodoma City, Tanzania


This study investigated the relationship between utilization of social media and performance of SMEs in Dodoma City, Tanzania. The specific objectives of the study were to examine the effect of effect of social media on SMEs performance, and the relationship between social media use and innovation and branding in SMEs. Data were collected from 336 systematic randomly selected SMEs using a structured questionnaire. Data analysis involved the use bivariate correlation analysis, structural equation model and confirmatory factory analysis. It was found that use of social media has significant effect on SMEs performance as it contributes to cost effectiveness, customer satisfaction and market performances. Similarly, use of social media also positively affects innovation and branding of SMEs. Thus, SMEs should be encouraged to fully exploit and use various available and affordable social media networks for marketing and networking purposes to rapidly increase performance and their growth.

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Shauri, N. , Magaria, B. and Masanyiwa, Z. (2023) Utilization of Social Media and Its Implications on the Performance of SMEs in Dodoma City, Tanzania. Open Journal of Business and Management, 11, 660-672. doi: 10.4236/ojbm.2023.112035.

1. Introduction

Advances in information technology over the past few decades have provided various platforms for communication and interaction among people worldwide (Chanthinok et al., 2015) . This technology has also enabled users to create content, share and disseminate as well as search and obtain information on diverse topics which actually make people timely updated (Öztamur & Karakadılar, 2014) . As part of this information era, social media have become more popular through building online communities which bring people together despite their longest physical distances. In business circles, online communities have brought about interaction between customers and businesses (Goi, 2014) . The fastest growing number of internet users, availability of internet services, and user friendliness of social media have attracted firms to exploit marketing opportunities which have emerged from advancement of information technology to increase volume of sales (Tajvidi & Karami, 2017; Zhang et al., 2017) .

According to Kaplan & Haenlein (2010) , social media, which are part of the internet communication technology, refer to a group of internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user generated content. These include Facebook, Twitter, WhatsApp, Instagram, YouTube and LinkedIn, amongst others. The emergency of social media has made firms to introduce marketing strategies which associate the electronic word which actually attracts and influences customer purchasing behaviors (Xie et al., 2016) . Social media provide platforms to customers to access varieties of information from other customers about products and brands regarding to their experiences and provided recommendations (Chen et al., 2011; Chanthinok et al., 2015) . Social media also play a great role in gaining trust and establishing relationship with customers, suppliers and potential partners. By gaining trust and building relationships, firms increase the values of businesses and enhance the brand values (Kumar et al., 2013; Hudson et al., 2016; Zhang et al., 2017) .

Use of social media is also important for Small and Medium Enterprises (SMEs), which contribute much to economic development especially of developing countries (Kazungu & Panga, 2015) . SMEs have been contributing to reducing unemployment and increasing investment into manufacturing industries for exports which in turn increase personal income and growth of Gross Domestic Product (GDP) (Al-Awlaqi et al., 2018; Salam & Hogue, 2019) . However, the good performance of SMEs among other factors relies on the use of appropriate marketing strategies to retain the existing and attract new customers, which leads to the increase of sales volumes (Masum & Fernandez, 2008; Achtenhagen et al., 2010) . In the context of the COVID-19 pandemic, for example, Kakumbi & Phiri (2022) argue that SMEs still need to remain functional by tapping into the opportunities offered by digital technologies and the internet.

Marketing strategies involve advertising using various platforms for persuasion, attraction and retention of customers (Kazungu, Matto, & Massawe, 2017) . However, advertisement in mass media such as televisions, radio, newspapers, billboards etc., is very costly and difficult for SMEs to afford (Sitharam & Hoque, 2016) . In this era of information technological advancement, social media marketing strategy has been observed to be more cost effective and affordable for SMEs to advertise their products and gain customer engagements (Stelzner, 2014; Spier, 2017) . Use of social media marketing strategy helps SMEs to enhance their entrepreneurial spirit and skills as they become more innovative and flexible due to understating and responsiveness to customer’s needs through earning closeness with customers and obtaining valuable feedback (Wilson et al., 2011; Liu & Kop, 2015; Yan & Musika, 2018) .

Studies show the advantages of social media for growth and performance SMEs, as they provide avenue for advertisement of products and consequently reaching more potential customers and increasing sales volume of the enterprises. Social media technology is cost effective for marketing since SMEs have an opportunity to make direct communication with millions of potential customers for less costs (Palmer & Koening-Lewis 2009; Kaplan & Haenlein, 2010; Tajvidi & Karami, 2017) . Pace (2008) states that the use of social media enables SMEs to attain high volumes with lower costs rather than the use of traditional marketing forms. Edosomwan et al. (2011) point out that social media save time and costs for collection of data about feedbacks on offered products and services by SMEs, and make instant solutions to customer’s responses.

Choi et al. (2014) found that social media provide opportunities for SMEs to provide knowledge and information about their products and services to potential customers to enhance their satisfaction. According to Balakrishnan et al. (2014) , customers are more interested in buying and providing feedbacks about the product bought via social media. This is due fact that social media enhance interaction between customers and SMEs through receiving and quick replying of messages and comments (Al-Hadban et al., 2014; Basri, 2016; Yan & Musika, 2018) . Belanche et al. (2019) argue that social media provide opportunities for customers to provide experiences and perception about consumed products and services which expresses their acquired level of satisfaction. Customers also provide comments on newly introduced products and services which define the level of satisfaction and gives advantage to SMEs to make decisions over those products.

Social media are also effective in promotion of products and brands as they provide platforms for online word-of-mouth, online communities and online advertisement (Balakrishnan et al., 2014) . Online word-of-mouth creates purchasing intentions and enhances satisfaction among customers (Balakrishnan et al., 2014; Yan & Musika, 2018) . Online communities and online advertisement enable SMEs to reach large number of potential customers within a very short time which eventually increases sales volumes (Pace, 2008; Tajvidi & Karami, 2017) . In turn, this aids SMEs to secure larger market shares and increase sales volume (Choi et al., 2014; Basri, 2016) .

Al-Hadban et al. (2014) show that social media enable the users to see what their friends and famous people are doing, likes and interests. Therefore, they are likely to like and do the same simply because they share same interests and/or attracted to what famous people do. This increases the purchasing intentions among customers which results to increase of sales volume (Sin et al., 2012; Ladhari & Michaud, 2015; Belanche et al., 2019) . Social media allows customers to interact between them and process commercial inputs automatically which consequently increases the purchase intentions (Belanche et al., 2019) . In addition, online marketing enables SMEs to access crucial information about their competing enterprises in terms of marketing activities and tactics, as well as product development and brand sediments (Ainin et al., 2015) . Thus, marketing managers can be in a position to develop and implement appropriate marketing content and strategies to compete in the market (Chanthinok et al., 2015; Kakumbi & Phiri, 2022) .

Social media provide avenues for customers to provide potential feedbacks which are helpful in product development and business development in general (Yan & Musika, 2018) . Ainin et al. (2015) suggest that social media technology improves customers relations and accessibility of information from potential customers and respond to meet their needs and expectations. Social media has significant role on branding of SMEs products and through direct and efficient communication with customers enables the enterprises to be more innovative on their products regardless of geographical limitations (Tajvidi & Karami, 2017; Kakumbi & Phiri, 2022) . They are effective in spreading brand awareness which in turn brings about brand loyalty and trust among customers (Al-Hadban et al., 2014) . Salam & Hoque (2019) point out that social media technology influences the effectiveness of relationship marketing since it creates trust, communication, bonding, shared value and empathy to SMEs brands. This is partly because social media act as benchmarks for direct communication between customers and enterprise, hence, strengthen public relations through personalized communication between two parts (Yan & Musika, 2018) .

The foregoing review and discussion shows that use of social media has association with performance of SMEs partly because social media have been observed to be cost effective, and are associated with customer satisfaction and market performance. Use of social media has also an influence on innovation and branding in SMEs. However, as Kakumbi and Phiri (2022) have observed, most SMEs have not been generally enthusiastic in their involvement with electronic commerce. In Tanzania there is paucity of information on the relationship between social media and performance of SMEs. Similarly, understanding about the influence of social media on innovation and branding in Tanzania is limited. Thus, the purpose of this study is to investigate the relationship between utilization of social media technology and performance of SMEs. The specific objectives of the study are twofold 1) to examine the effect of social media on SMEs performance, and 2) to examine the relationship between social media use and innovation and branding in SMEs.

2. Research Methodology

This paper draws on an empirical study that was conducted among selected SMEs in Dodoma City, Tanzania. The targeted population for this study was 1658 SMEs obtained from the database of Dodoma City Council. Systematic random sampling technique was used to obtain a sample of 336 enterprises drawn from the list of registered SMEs in Dodoma City Council. The selected sample was about 20.3% of the study population, which was considered sufficient to provide reasonable control over sampling error (Grinnell, 2001) . Data were collected from SMEs managers or their representatives using a structured questionnaire with closed-ended questions, adopted from various a range of literature as explained hereunder.

Multiple items were used to measure each variable included in the study. The variables used are estimated scales from their definitions and are relevantly applied in marketing. The study used questions which measure perceptions using the five-point Likert scale with intervals ranging from 1 = Strongly Disagree to 5 = Strongly Agree (Newell & Goldsmith, 2001) . In this study, social media use was used as the independent variable. Social media in marketing dwells on application of social media technology for marketing activities including advertisement, promotion and communication with customers (Öztamur & Karakadilarb, 2014) . The variable was adopted from a wide range of literature reviewed.

Mediating variables included cost effectiveness, customer satisfaction, and market performance. Cost effectiveness is concerned with the use of less marketing costs that arise from the use social media compared to offline marketing platforms. The variable was adopted from Chanthinok et al. (2015) and Ainin et al. (2015) . Customer satisfaction was measured by the perceived state level of gratification acquired from offered SMEs products and services that are over a customer’s expectations and demands. The variable and its measurement of five-point scale were adopted from Chanthinok et al. (2015) and Culnan et al. (2010) . Market performance concentrates on level of increase of sales volume, expansion of market and increase of market share of the SMEs. The variable was adopted to investigate the mediation between social media use and SMEs performance, because enterprises always look for improvement of marketing processes that are more likely to improve market performance. This variable and its measurement scale were adopted from Balakrishnan et al. (2014) .

Two dependent variables were included in this study: SMEs performance, and innovation and branding. SMEs performance concentrates on growth and profitability of the enterprises. Growth focuses on increase of market shares and turnover of the SMEs. Profitability focuses on increase of profit, return on investments and total income. The variable was adopted to investigate the relationship between use of social media technology with SMEs performance (Tajvidi & Karami, 2017) . Innovation and branding focus on product and service development as well as branding in SMEs. This variable was adopted to investigate the linkage between the use of social media technology, innovation and branding, and SMEs performance (Basri, 2016) .

Bivariate correlation analysis was conducted to test correlation between the independent variables and dependent variable. Structural equation model (SEM) was used to test the relationship between the variables stated in this study. This involved measures of central tendency and dispersion, and testing the validity and reliability of the data. Further, confirmatory factory analysis (CFA) was used to test the fitness and validation of data in the research model (Tajvidi & Karami, 2017) .

3. Results and Discussion

3.1. Descriptive Analysis Results

Results in Table 1 show that there was positive correlation between the variables entered in the structural equation model. This means that an increase in the independent variable (social media use) and mediating variables (cost effectiveness, customer satisfaction, and market performance) caused an increase in the dependent variable (SMEs performance, and innovation and branding). This relationship is further examined in the next sub-sections using the structural equation model and confirmatory factory analysis.

3.2. Measurement Model

To test the unidimensionality of the variables, factor loading was used. Results in Table 2 show that all variables and items were above the threshold value of 0.6 (Salam & Hoque, 2019) , hence, unidimensionality was achieved. Cronbach’s alpha was used to test reliability of the data. All variables were above the minimum value of 0.70, hence, achieving internal reliability. It was found that social media had 0.899, cost effectiveness (0.871), customer satisfaction (0.887), market performance (0.901), innovation and branding (0.784) and SMEs performance (0.927). This means that all variables were reliable for further statistical analysis.

Further, composite reliability was tested and the results were as follows: social media (0.931), cost effectiveness (0.904), customer satisfaction (0.923), market performance (0.827), innovation and branding (0.935) and SMEs performance (0.865). Overall, all variables were above the threshold scale of 0.6. Average variance extract (AVE) was also used to test the validity of the data and all variables were above the suggested value of 0.5 (Ainin et al., 2015; Salam & Hoque, 2019) , which indicates that convergent validity was achieved. Again, this preliminary analysis showed that these variables were valid and reliable for further statistical analysis.

Table 1. Descriptive analysis and correlation matrix.

***Correlation is significant at the 1% (2-tailed).

Table 2. Measurement model.

Factor loading significant level > 0.5. Reliability satisfactory level > 0.6. Convergent validity (AVE) satisfactory > 0.50.

3.3. Confirmatory Factory Analysis

CFA results show that the data used in this study fit the model as indicated by the Chi-square test, goodness of fit index (GFI), average goodness of fit index (AGFI) and RMSEA as presented in Table 3. The results show that GFI was above the recommended value of 0.9 and RMSEA was below the acceptable value of 0.08 (Hair et al., 2012). Therefore, the model fits for further analysis.

3.4. Estimation Model Results

Results in Table 4 show that use of social media had positive effect on performance of SMEs. Cost effectiveness, customer satisfaction and market performance as social media constructs, positively influenced SMEs performance. It was found that use of social media had positive effect on SMEs performance (β = 0.87, p = 0.00), implying that use of social media increases SMEs profitability and growth. Use of different platforms of social media for marketing and networking positively affected the general performance of the SMEs involved in this study. These findings are similar to observations by Basri (2016) and Tajvidi and Karami (2017) who confirmed existence of positive and significant relationships between use of social media and SMEs performance.

Further, cost effectiveness had positive influence on SMEs performance (β = 0.73, p = 0.00). This suggests that use of social media is cost effective, hence, leads to profitability of SMEs. Social media use reduces the costs for marketing and other activities, which consequently increases the SMEs profitability. In turn, this helps SMEs to reduce the operating costs while at same time optimizing profitability. A more or less similar study by Apenteng and Doe (2014) in Ghana established that use of social media enables SMEs to reach greater market including outside markets at low costs. In Zambia, Kakumbi & Phiri (2022) found that adoption of social media by SMEs made it possible for SMEs to be more visible and to communicate more with clients, communicate their products and be able to market their products using prominent people. In turn, SMEs were also able to create ties and to get feedback from clients. This helped in the growth of SMEs as they were able to penetrate new markets and develop new products.

Table 3. Confirmatory factory analysis results.

Table 4. Estimation for structural model results.

Similarly, customer satisfaction positively influenced the performance of SMEs (β = 0.49, p = 0.00). This indicates that use of social media facilitates customer satisfaction which in turn influences SMEs performance. Social media provide avenues for customers to provide feedbacks and perceptions about the offered products and services. This is consistent with Mm (2015) and Basri (2016) who reported that the social media enhance customer satisfaction through direct communication and interactions, which provide avenues for feedbacks, comments and views about products offered by SMEs. According to Kakumbi & Phiri (2022) social media technologies positively impact the customer-orientated processes of SMEs, which in turn impact their sales performance. These processes include understanding customers, adapting to customers changing needs, measuring customer satisfaction, and aligning customer needs with sales and marketing activities.

Moreover, market performance had a positive effect on the performance of SMEs (β = 0.67, p = 0.00). Impliedly, this means that use of social media enables market performance which leads to SMEs performance. Use of social media for marketing facilitates market performance which directly increases profitability and growth of SMEs. Social media enables SMEs to reach great market and influences purchasing intentions to customers which results to increase of sales and expand its market share. In Saudi Arabia, Abed et al. (2015) found that the social media help SMEs to energize marketing strategies to increase sales volume. According to Andzulius et al. (2012) social media have an active role in determining SMEs sales process and sales outcomes.

It was further established that use of social media had positive and significant relationship with innovation and branding in SMEs (β = 0.86, p = 0.00). This could mean that use of social media contributes to innovations and branding in SMEs. Social media provide opportunities for SMEs to develop new ideas based on customers feedbacks, views and comments. SMEs also use social media to introduce new products and seek likes and comments from customers which enables them to understand the needs of customers, hence, develop and/or modify products based on market needs. Liu and Kop (2015) and De Almeida et al. (2016) report that followers provide critics and their perceptions about the products of products and brands. Shabbir et al. (2016) found that SMEs create fan pages for followers and solicit suggestions and opinions which help in improving the businesses. Social media have also been found to be boosting customer relation which creates and enhances customer trust, bonding, communication and loyalty to the brands (Mm, 2015) .

4. Conclusion and Recommendation

This study investigated the relationship between utilization of social media and performance of SMEs in Dodoma City, Tanzania. Based on the findings of the study, the following conclusions can be drawn. First, use of social media has significant effect on SMEs performance as it contributes to cost effectiveness, customer satisfaction and market performances. Second, use of social media also positively affects innovation and branding of SMEs. It is, therefore, recommended that SMEs should be encouraged to fully exploit and use various available and affordable social media networks for marketing and networking purposes to rapidly increase performance and their growth. This study was limited to SMEs in one city only. Thus, the findings and conclusions of this study could be context specific. Further studies should consider looking at potentials of social media in other types of businesses and enterprises in a wider geographical area to draw more generalizable findings and conclusions.

Conflicts of Interest

The authors declare no conflicts of interest.


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