Industrial Marketing Management 31 (2002) 177 188

Marketing activities and performance A comparison of the Internet-based and traditional small firms in Taiwan
Wai-sum Siu*
Department of Marketing, Hong Kong Baptist University, Kowloon Tong, Hong Kong, The Peoples Republic of China Received 15 May 2000; received in revised form 2 January 2001; accepted 25 February 2001

Abstract Emerging technologies, notably, have redefined business by erasing the traditional boundaries of time and geography and by creating new virtual communities of customers, distributors and suppliers, with new demands for products and services. Are there any differences between the marketing practices of the Internet-based and traditional small firms? This paper analyses published, undisguised stories of 112 traditional and 26 Internet-based small firms in Taiwan. The research results suggest that the owner-managers of both traditional and Internet-based small firms concentrate on sales, product planning and customer relationships. However, the owner-managers of traditional small firms in Taiwan place emphasis on quality control, whereas their Internet-based counterparts concentrate more on product schedules, sales forecasts, sales control and marketing research. These results indicate that cyber entrepreneurs have higher levels of marketing education and backgrounds, conduct marketing planning periodically and frequently and perform professional marketing activities. The research findings tend to suggest that though traditional marketing tenets are still suitable in the cyber environment of Taiwan, the Internet-based small firms have to utilise innovative marketing techniques to suit and compete in the ever-changing Internet business environment. D 2001 Elsevier Science Inc. All rights reserved.
Keywords: Small firms; Marketing; Internet-based; Taiwan; Chinese

1. Introduction Most people think that e-commerce means web shopping, that is, online shopping at Amazon.com or eBay.com via a networked personal computer at home. Of course, any of the search engines on the web will identify thousands of websites related to e-commerce. As of 1 January 2001, AltaVista identified 1,644,275 webpages containing the word e-commerce in response to a word search. E-commerce, the new way of doing business, is now challenging traditional business models. We are witnessing the emergence of new terms like e-trade, e-business, e-finance, e-procurement, e-tailing, e-coupon, etc. On top of that, the third-generation (3G) wireless network along with Mobile Commerce or M-Commerce, which allows users to access systems whenever they want without physically being connected to the network, will soon come to the fore. Notably, emerging technologies have redefined business by

* Tel.: +852-2339-7532; fax: +852-2339-5586. E-mail address: wssiu@hkbu.edu.hk (W. Siu).

erasing the traditional boundaries of time and geography and by creating new virtual communities of customers, distributors and suppliers, with new demands for products and services. The Internet is now redefining virtually every aspect of how business is done, and while the majority of companies around the world is still and will continue to be brick-and-mortar, every business needs to leverage the power of the Internet or risk going out of business. Specifically, the traditional sender-initiated communication process is challenged by the new customer-initiated interactive communication flow and the Internet has become a pull, interactive and one-to-one medium. Thus, marketers need to treat customers as partners rather than targets and shift their thinking process from the supply side to be demand oriented. Also, there is a strong need to aggregate like-minded consumers by establishing communities rather than using segmentation to define target groups arbitrarily. Hoffman and Novak [1] suggest that the Internet facilitates a paradigm shift and a revised marketing communication model, from one-to-many to many-to-many. Given that the traditional communication medium has been shifted to a digital environment, the business characteristics and

0019-8501/02/$ see front matter D 2001 Elsevier Science Inc. All rights reserved. PII: S 0 0 1 9 - 8 5 0 1 ( 0 1 ) 0 0 1 7 6 - 6

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marketing practices, as suggested by Kiani [2], also need to change accordingly. Are there any differences between the traditional and Internet-based marketing practices? Taiwan has one of the top three information technology (IT) markets in the world, and in 1998, Taiwan-made laptop computers gained over 40% of the market share of the global market [3]. Given the strong support of computer hardware manufacturing, Taiwan is experiencing fast development of e-commerce. The sales of Internet services increased dramatically from NT$12 billion in 1998 to NT$17 billion in 1999 as shown in Table 1 [4]. For a long time, various policies, such as tax incentives, low interest loans and special training programs, have been supported by Taiwans Ministry of Economic Affairs Industrial Development Bureau to assist and encourage the development of the IT industry. Taiwans Education Department has also integrated IT systems into the teaching process to support the governments technological development thrust. In 1999, the number of Internet users in Taiwan increased to 450 million [5]. In response to the surge of the Internet population, in 1999, TV cable, which offered high speed and good quality data transfer, was first used in the network market. According to the Marketing Intelligence Centre [4], the ratio of personal users on Internet services to business users will change from 4:1 in 1999 to 1:1 gradually in 2002. As business-to-business transactions (B-to-B) are the driving force of e-commerce, such change means that the demand of business-to-customer (B-to-C) services will also increase accordingly. The sales amount of the Internet services industry is expected to reach a peak of NT$45.69 billion in 2002 (see Table 1). Much of the research on marketing in general and on small firm marketing in particular has been conducted in a Western context. Increasingly, however, it is becoming apparent that the basic principles and practices that apply in one specific environment may not be necessarily relevant and applicable in another. Siu and Kirby [6] have argued that in the case of small firms, research on marketing needs to adopt a contingency approach. In pursuit of this, they have undertaken [7] a comparison of eastern and western small firm marketing practices. The drastic growth of the e-commerce provides an opportunity to extend the work into Taiwan where small firms, specifically Internet-based small firms, are beginning to play an increasingly important role in the development of the economy.
Table 1 Sales turnover of network services in Taiwan, 1998 2002 (in NT$ billion) 1998 Electronic database service Internet network provider Other added-value service Data network renting Others Total 0.92 3.27 3.24 3.1 1.62 12.15 1999 1.36 4.09 3.78 6.01 2.02 17.26 2000 1.78 5.15 5.02 9.25 3.63 24.83 2001 2.13 5.5 7.69 12.51 5.53 33.36 2002 2.66 8.19 10.38 15.54 8.92 45.69

2. Research questions Though management researchers [8,9] have pointed to the importance of marketing as the factor that adds the essential ingredient for success in business [10,11] in Taiwanese companies, their studies do not take company size, sociocultural environment and technological innovation into consideration. Further, no major research study has been undertaken to examine exactly how and to what extent the Internet-based small firms in Taiwan have managed to survive, grow and succeed. In addition, more specifically, how do they make marketing decisions, promote their products and maintain competitiveness in the ever-changing Internet environment? Given the apparent importance but clear neglect of marketing to the success of the Internet-based small firms in Taiwan, this paper attempts to verify insights gained from Siu [12] and to provide a clearer, more systematic picture of the marketing practices of Taiwanese small firms, specifically the traditional and Internet-based small firms in Taiwan. Against this background, this study analyses 138 published, undisguised stories about Chinese owner-managers in Taiwan. Specifically, this research seeks to answer the following questions: 1. Are there differences and similarities between marketing tenets of the Internet-based and traditional small firms in Taiwan? 2. How do marketing practices and principles in the Internet-based small firms in Taiwan differ, if at all, from those adopted by their traditional counterparts?

3. Literature review Kohli and Jaworski [13] define market orientation as the organization-wide information generation and dissemination process that results in an appropriate response related to current and future customer needs and preferences. Specifically, Narver and Slater [14] suggest that the market orientation concept be examined through three behavioural components (customer orientation, competitor orientation and interfunctional orientation) and through two decision criteria (long-term focus and profitability). Recent research results [13 15] have pointed to the positive relationship between market orientation and marketing performance. However, this marketing research has been confined to large firms and American marketing managers [14,16]. There has been relatively little coherent research on Chinese small firm marketing [6]. Horng and Chen [17] reveal that the market orientation of SMEs in Taiwan is a critical determinant of its business performance. However, Horng and Chen [17] adopt the MARKOR scale, which was developed from a sample of large-scale American companies. The applicability of the western instruments to Chinese small

Source: Marketing Intelligence Centre [4].

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firms is dubious [18]. Ngai and Ellis [19] also argue that company performance is related to marketing practices, not to market orientation, in the Hong Kong context. Reviewing the literature suggests that research on Chinese small firms should consider using the contingency approach, as suggested by Siu and Kirby [7], which is to adjust the research in accordance with the situational factor. Thus, this paper will follow Siu and Kirbys [6] research approach and design to analyse published reports of the traditional and Internet-based small firms in Taiwan.

to small business environments (adaptation), evolution of marketing (stages of marketing development) and specific level of marketing activities (level of activity). Each dimension has two to four options for responses ranging from no or little marketing to substantial or explicit marketing.

5. Research methodology 5.1. Research design Zaltman et al. [23] propose using a theory-in-use approach, working alongside managers, to study their marketing activities. However, small firms, compared with large firms, are less willing and able to cooperate in survey research and are often quite reluctant to open the company to an unknown researcher for observation. Moreover, they often have no formal marketing policies and/or are not aware of their strategic decisions [24]. All these drawbacks make undertaking small firm research difficult. Thus, Manimala [25] proposes the use of analysing published, undisguised stories about owner-managers and their firms to identify the owner-managers marketing activities and strategic marketing decisions based on the nonroutine decisions of the owner-managers. However, the accuracy in presentation and consistency in emphasis are major drawbacks of using undisguised stories. Specifically, the undisguised stories are not written for the research and the content of the report is likely to be biased by the intent and language of the reporter. However, these problems are not insurmountable. First, in the context of this research, the market performance may underline several marketing decisions. Thus, omission of one or more of these may not necessarily imply that the underlying marketing performance is missed. For example, the importance of customer orientation may be reflected in a wide range of activities, such as customer information solicitation, new product development and price setting. Reporting on one of the decisions may help identify the customer orientation of the company. Second, if the document base is large enough to include sufficient numbers of marketing decisions in diverse areas and various sources, it will help provide a comprehensive perspective on individual small firms and also facilitate validation of the data. Furthermore, as explained above, the strategic marketing decisions of Chinese small firms are inferred from the nonroutine decisions of the owner-managers. The use of published, undisguised stories for this research is appropriate because such stories generally focus on nonroutine decisions, highlighting the successful strategies adopted by each small firm, and can be expected to be free from deliberate falsification or misrepresentation of facts [25]. Miller and Friesen [26] also recognise that published, undisguised reports may be more reliable than survey research methods because it is more difficult for an owner-manager to hide a real situation from a case writer who studies the firm in detail. Also, in a Chinese society,

4. Conceptual framework In order to have a balanced view to advance small firm marketing knowledge [6], both normative marketing theories and specific small business marketing models have been integrated to form the analytical framework. Models, including Marketing Activities [20] and Marketing Performance for Small Business [21], were distilled and constructed to form a content analysis schedule, so as to determine whether Chinese small firms exhibit the same marketing activities and behaviour that their western counterparts do. The two models were selected on purpose, as they had previously been applied in understanding small firm marketing performance and activities. Moreover, the two models are essentially related to the conceptual, activity and performance issues of the marketing paradigm. The Marketing Activities model proposed by Dunn et al. [20] is based on a list of 19 marketing activities developed from McNamaras [22] work to examine the marketing activities of American owner-managers. The 19 marketing activity categories are customer relations, advertising, sales, pricing, market research, sales forecasts, sales control, public relations, product planning, credit extension, sales training, quality control, dealer relations, sales recruiting, product services, product schedule, inventory control, packaging and warehousing. Each category has two options: YES or NO. It is believed that the differences in marketing may be influenced also by the specific nature of the marketing activities undertaken by the owner-managers. Thus, this model is used to determine which of these individual activities is the responsibility of the owner-manager. The Marketing Performance for Small Business model, proposed by Carson [21], is an integrative model specifically used to understand the marketing performance of small firms. The specific characteristics and limitations of small firms are considered in analysing small firm marketing. The marketing performance model consists of eight dimensions. These are limitations of marketing expenditure (expenditure), limitations of marketing know-how (expertise), limitations of market awareness (impact), marketing activities follow norms or adapt to environments (level of generalization), marketing at a planning or operational level (planning vs. operation), level of planning activities adapted

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there is typically high secrecy regarding profits and marketing operations. In most cases, the only means to obtain information is via newspaper reports. Chinese owner-managers are unlikely to grant personal interviews to unknown researchers. Instead, for some reasons or other, they prefer to maintain a low profile or remain low key. Using content analysis via published reports seems to be a more accessible way to research marketing in a Chinese sociocultural context. Thus, published, undisguised stories were collected for this research in order to shed initial insight on the marketing activities and performance of small firms in Taiwan. 5.2. Sampling procedures In recent years, the Small and Medium Enterprise Administration and the China Management Association of Taiwan have coordinated with university professors to published interview reports with entrepreneurs. Also, in 1999 and 2000, a handful of publishers have published success stories of Internet-based companies in Taiwan (Appendix A). These books formed the sampling frame for data collection. The books included stories based on interviews with managers of large and public enterprises, but only independent owner-managers were selected as a database. Duplicate stories were integrated into one unit for analysis. In total, 165 stories were collected. They were further screened by the criteria proposed by Brooksbank [27] for small- and medium-sized industries. Firms with fewer than 500 employees and an annual turnover of less than or equal to NT$1500 million (US$50 million) were selected. However, Siu and Martin [28] suggest that the intersectoral business diversification of Chinese small firms is commonplace in Chinese societies. Accordingly, the product strategy proposed by Brooksbank [27] was not adopted as one of the screening criteria. Also, listed companies were not selected as they no longer possessed the small business characteristics, as suggested by Osteryoung and Newman [29]. If the story reported that a firm grew to a size that no longer conformed to Brooksbanks [27] and Osteryoung and Newmans [29] classifications for smalland medium-sized firms, the specific portion of the story relating to the large-sized firm was discarded. Stories not having any materials related to marketing were also rejected. On this basis, undisguised stories of 112 traditional and 26 Internet-based small firms were included as a database for extraction and analysis. 5.3. Analytical method The study uses the content analysis process proposed by Marino et al. [30] specifically for entrepreneurship research to identify the marketing activities and performance of small firms in Taiwan. To ensure data reliability, 138 stories were coded simultaneously but independently by two native Chinese speakers. The list of 19 marketing activities

developed by Dunn et al. [20] was applied to examine the marketing activities of Chinese owner-managers in Taiwan. The coders were required to check which of these individual activities was the responsibility of the owner-manager. Eight dimensions from the Marketing Performance for Small Business model [21] were adopted to examine marketing performance. A pretest was undertaken to determine the suitability of using the instrument (see Appendix B) in content analysis. The coders collected information from the undisguised stories as it related to the eight dimensions. The appropriate option was coded for each dimension. If any undisguised story did not carry the specific piece of information related to the questions, it was assumed that the owner-manager did not place emphasis on this particular aspect and the lowest option indicating no or little marketing would be coded. Overall intercoder reliability was 90.5%, which was regarded as satisfactory [31]. The differences between the coders among all items were then discussed until a final consensus was reached. The mutually agreed results were used for the analysis.

6. Results 6.1. Marketing activities In order to determine whether the traditional and Internet-based small firms in Taiwan give different or similar weights to the 19 activities, rankings were established according to the proportion of firms in each category. A higher rank indicated that a larger percentage of the owner-managers was in charge of, or responsible for, a specific marketing activity. The distribution in Table 2

Table 2 Rankings of marketing activity traditional vs. Internet-based ownermanagers in Taiwan Marketing activities Product planning Sales Quality control Customer relations Dealer relations Product schedules Pricing Product service Sales control Advertising Market research Sales forecasts Public relations Sales training Warehousing Inventory control Packing Credit extension Sales recruiting Number of firms Traditional (%) 87.5 83.9 74.1 68.8 56.3 55.4 41.1 40.2 34.8 30.4 29.5 29.5 29.5 14.3 13.4 12.5 9.8 6.3 5.4 112 Ranking 1 2 3 4 5 6 7 8 9 10 12 12 12 14 15 16 17 18 19 Cyber (%) 100 96.2 11.5 84.6 76.9 92.3 57.7 50 53.8 34.6 50 65.4 34.6 0 11.5 11.5 0 0 15.4 26 Ranking 1 2 15 4 5 3 7 9.5 8 11.5 9.5 6 11.5 18 15 15 18 18 13

W. Siu / Industrial Marketing Management 31 (2002) 177188 Table 3 Limitations of expenditure and types of small firms in Taiwan Limitations of expenditure Minimal Limited Substantial Column total
2

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Table 5 Limitations of impact and types of small firms in Taiwan Limitations of impact Minimal and limited Substantial Column total Traditional 22 (19.7%) 90 (80.3%) 112 (91.8%) Internet-based 5 (19.2%) 21 (80.8%) 26 (18.8%) Row total 27 (19.6%) 111 (80.4%) 138 (100%)

Traditional 15 (13.4%) 38 (33.9%) 59 (52.7%) 112 (91.8%)

Internet-based 3 4 19 26 (11.5%) (15.4%) (73.1%) (18.8%)

Row total 18 42 78 138 (13%) (30.5%) (56.5%) (100%)

c2 value = 1.05539, df = 1, P value = .58996.

c value = 3.99327, df = 2, P value=.13579. Cells with expected frequency < 5 = 16.7%.

shows that the rankings of marketing activities of the Internet-based small firms are somewhat similar to those of the traditional small firms in Taiwan. Both the traditional and Internet-based owner-managers concentrate on sales, product planning and customer relationships. However, the owner-managers of traditional small firms place emphasis on quality control, whereas their Internet-based counterparts concentrate more on product schedules, dealer relationships and sales forecasts. When the rankings are examined in greater detail, there are clear differences in the activities on which the traditional and Internet-based small firms appear to concentrate. Taking quality as an example, 74.1% of the traditional small firms perceive establishing and maintaining quality control to be a major marketing activity, whereas in the Internet-based small firms, the percentage is only 11.5%. Further, 92.3% of the Internet-based ownermanagers are in charge of the product schedules, whereas in small traditional firms, only 55.4% of the chief executives work on the product schedules. Moreover, the Internet-based small firm owner-managers perceive sales forecasts (65.4%) and market research (50%) as important, whereas for those in the traditional small firms, the percentages are 29.5% for both. The evidence suggests, therefore, that the traditional small firms put most of their efforts on quality control, whereas the Internet-based small firms emphasise product schedules, sales forecasts and marketing research. Thus, the traditional small firms in Taiwan can be classified as quality conscious, while the Internet-based small firms appear to be more sales oriented. 6.2. Marketing performance From Table 3 (c2 value = 3.99327, df = 2, P value=.13579), it would seem that at the 95% confidence level there is no statistical difference between the limitations of expenditure and the type of firm. More than 85% of both the InternetTable 4 Limitations of expertise and types of small firms in Taiwan Limitations of expertise Minimal Limited Substantial Column total Traditional 74 (66.1%) 35 (31.2%) 3 (2.7%) 112 (91.8%) Internet-based 13 6 7 26 (50%) (23.1%) (26.9%) (18.8%) Row total 87 41 10 138 (63%) (29.7%) (7.3%) (100%)

based and traditional small firms in Taiwan spend most time and resources on markets and customers. In Table 4 (c2 value = 18.45559, df = 2, P value = .0010), it is shown that a statistically significant difference exists between the limitations of expertise and the type of firm. About 26.9% of the Internet-based owner-managers and their colleagues have substantial marketing backgrounds, whereas the nature and amount of marketing education attained by most traditional owner-managers in Taiwan (66.1%) are classified as minimal and limited. Table 5 (c2 value = 0.00228, df = 1, P value = .96194) shows that no statistically significant difference exists between the limitations of impact and the type of firm. About 80% of the Internet-based and traditional small firms in Taiwan are well known in the marketplace. Be that as it may, the sample only includes famous firms in Taiwan. According to Table 6 (c2 value = 1.28065, df = 1, P value = .25778), there is no statistically significant difference between the level of generalization and the type of firm. About 80% of the Internet-based and traditional small firms in Taiwan are situation specific and they apply innovative and imaginative marketing programs designed to suit their own particular circumstances and requirements. Table 7 (c2 value = 4.65420, df = 1, P value = .03098) reveals that at the 95% confidence level, there is a difference between the degrees of planning vs. operation and the type of firm. About 58% of the traditional small firms are concerned with the operations of marketing, whereas 65.4% of the Internet-based small firms carry out marketing planning regularly. As shown in Table 8 (c2 value = 0.00169, df = 1, P value = .97168), there is no statistically significant difference between the type of firm and the level of marketing planning adapted. About 70% of the Internetbased and traditional small firms exhibit a relatively high degree of refinement of marketing planning techniques to suit the characteristics of small firms and their particular circumstances. Table 9 (c2 value = 4.98397, df = 2, P value = .08275) shows there is a statistically significant difference at the 90% level of confidence between the small firms stages of marketing development and the type of firm.

Table 6 Levels of generalization and types of small firms in Taiwan Level of generalization General/industry concepts Situation specific Column total Traditional 29 (25.9%) 83 (74.1%) 112 (91.8%) Internet-based 4 (15.4%) 22 (84.6%) 26 (18.8%) Row total 33 (23.9%) 105 (76.1%) 138 (100%)

c2 value = 18.45559, df = 2, P value = .00010. Cells with expected frequency < 5 = 16.7%.

c2 value = 1.28064, df = 1, P value = .25778.

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W. Siu / Industrial Marketing Management 31 (2002) 177188 Table 9 Stages of marketing development and types of small firms in Taiwan Row total 74 (53.6%) 64 (46.4%) 138 (100%) Stages of marketing development Reactive and tinkering Entrepreneurial Proactive Column total Traditional 30 56 26 112 (26.8%) (50%) (23.2%) (91.8%) Internet-based 3 (11.5%) 12 (46.2%) 11 (42.3%) 26 (18.8%) Row total 33 68 37 138 (23.9%) (49.3%) (26.8%) (100%)

Table 7 Planning vs. operations and types of small firms in Taiwan Planning vs. operations Minimal Balanced Column total Traditional 65 (58%) 47 (42%) 112 (91.8%) Internet-based 9 (34.6%) 17 (65.4%) 26 (18.8%)

c2 value = 4.65420, df = 1, P value = .03098.

c2 value = 4.98397, df = 2, P value = .08275.

About 27% of the traditional small firms are classified as reactive and tinkering. However, about half of the Internetbased small firms are classified as proactive. This suggests that the traditional small firms tend to rely heavily upon personal contact networks of the entrepreneurs and/or the owner-managers, whereas the Internet-based small firms exhibit professional marketing activities. According to Table 10 (c2 value = 2.86878, df = 2, P value = .23826), there is no statistically significant difference between the level of the marketing activity and the type of firm. About one-tenth of the Internet-based and traditional small firms practice little or no marketing. They are reactive to consumer inquires and have little or no knowledge of who their customers are or from where they come. In contrast, over 90% of both the Internetbased and traditional small firms exhibit explicit and sophisticated marketing. They engage in marketing activities as part of a coordinated and integrated program with clear objectives and purpose.

Also, one Internet-based owner-manager proudly recapitulated his sales control experience:
We had no sales for several months. Even salary payment became a problem. We launched the Bowling Strategy and sold our product as a bundle together with VGA cards. Finally, we successfully launched our new products, and we became well known in the market.

One cyber owner-manager shared his market research experience, I read newspapers and search information from the Internet everyday. In the past, I used the BBS frequently. When I discover the newest market information, I share with my colleague through e-mail immediately. Internet-based owner-mangers also stress their flexibility in product scheduling. The remark of one cyber ownermanager is illustrative:
Firstly, relationships play an important role in Chinese society. We thought that an Alumni Association should have great potential. Then, when we saw the ardent responses and we came up with the Join Free idea. The number of memberships increased drastically. After that, we followed the same direction and provided much more services and activities to enhance customer loyalty.

7. Discussion Table 11 summarises the differences between the marketing practices of the traditional and Internet-based small firms in Taiwan. The content analysis suggests that the major marketing activities of the Internet-based and traditional small firms are sales, product planning and customer relationships. However, the owner-managers of the Internet-based small firms concentrate more on product schedules, sales forecasts, sales control and marketing research compared with their traditional counterparts. One Internet-based owner-manager said modestly about his forecasting activities, I predict that when the number of customers is more than 1 million, our brand will become the market leader. Another Internet-based owner-manager said, We design questionnaires, analyse customer needs and provide the best services.

Interestingly, however, Taiwanese traditional entrepreneurs are involved heavily in quality control and the differences can be reflected in their business philosophies. About 90% of Taiwanese Internet-based owner-managers do not mention quality in the undisguised stories. Be that as it may, they are service providers and the quality of service cannot be measured easily as quality in a traditional product. Or, as the Internet is a fast-moving industry and the cyber firms are carrying out marketing activities at a situation-specific level, service quality, instead of being controlled, is improving at all times. Notably, small traditional firms in Taiwan

Table 10 Levels of marketing activity and types of small firms in Taiwan Table 8 Marketing planning adapted and types of small firms in Taiwan Marketing planning adapted Traditional Limited Substantial Column total Internet-based Row total 42 (30.4%) 96 (69.6%) 138 (100%) Level of marketing activity Little Implicit Explicit Column total Traditional 10 55 47 112 (8.9%) (49.1%) (42%) (91.8%) Internet-based 3 8 15 26 (11.5%) (30.8%) (57.7%) (18.8%) Row total 13 63 62 138 (9.4%) (45.7%) (44.9%) (100%)

34 (30.4%) 8 (30.8%) 78 (69.6%) 18 (69.2%) 112 (91.8%) 26 (18.8%)

c2 value = 0.00169, df = 1, P value = .96718.

c2 value = 2.86878, df = 2, P value = .23826. Cells with expected frequency < 5 = 16.7%.

W. Siu / Industrial Marketing Management 31 (2002) 177188 Table 11 Marketing performance and marketing activities of the traditional and Internet-based small firms in Taiwan Marketing dimensions Environmental characteristics Main role Marketing activities Traditional small firms Original brand marketers Manufacturer Quality control Cyber small firms

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Marketing expenditure Marketing expertise Market impact Level of generalization Planning vs. operations Marketing planning adapted Stages in marketing development Level of marketing activity

Limited substantial Minimal Substantial Situation specific Minimal Substantial Midstage entrepreneurial Implicit explicit

Original brand marketers Services provider Product schedule Sales forecast Sales control Marketing research Substantial Limited substantial Substantial Situation specific Balanced Substantial Mature stage proactive Explicit

place emphasis upon quality and this can be illustrated with their business philosophies:
Reliability, Innovation, Quality and Service Quality and technology are enormous assets to the enterprise; all the employees are the owners of the enterprise.

Quality enjoys a supreme priority in the business philosophy development of the traditional small firms in Taiwan. Also, the traditional and Internet-based small firms in Taiwan understand the importance of maintaining good customer relationships. An owner-manager of a traditional firm said, There were about 100 shops in Taiwan at that period of time. I drove with my motorbike to travel across the whole island. It took me more than 2 weeks for each trip. On average, one shop would only buy 5 to 10 sets of components, about NT$750 1500. Also, I had to visit each shop for three or four times to collect the debt. Taiwanese Internet-based owner-managers also place emphasis on long-term customer relationships and one of them said, We try to make friends with our customers and dealers. This approach not only makes the cooperation much smoother but also enhances long-term relationships. It also supports our promotion strongly. Taiwanese Internet-based owner-managers have substantial marketing expertise. About 40% of the Internet-based owner-managers have studied marketing as part of their general management studies; another 40% even have undertaken long-term learning programs in marketing. Taiwanese Internet-based owner-managers practice balanced marketing planning. One Internet-based owner-manager said, The investment plan I suggested had been well received. I could tell exactly the amount of cash flow at every stage . . . I predicted that the sales turnover of our company could attain NT$5 billion in 2001. Another Internet-based owner-manager shared his experience of marketing planning, My plan is: We select our product very carefully at the beginning. We operate a lot of electronic newspapers. Of course, some grow faster,

but some slower. We try to assist them. If they do not perform well, it will have adverse effects on our brand image. When the sales turnover attain a certain volume, we talk with the chief executive officer of the newspaper about the copyright issues and other sales support activities. We think that exercising better control over the quality is the only way to retain readers and create much more profits. In contrast, one small traditional owner-manager recognised:
SMEs do not need to have too many strategies. If they could develop one or two competitive advantages and find the market niche, they can survive.

This also explains why the traditional small firms have few little strategic marketing planning activities. The research findings also reveal that the Internet-based small firms in Taiwan are at the mature stage of the marketing development cycle and exhibit proactive, explicit and sophisticated marketing. In contrast, most owner-managers of the traditional small firms attained relatively less marketing education. Their firms are at the midstage of the marketing development life cycle and exhibit both implicit and explicit marketing activities. One example from a Taiwanese traditional small firm is illustrative: The chairman of a Taiwanese company thought that doing business and managing an enterprise were different. Thus, he believed that performing as an original equipment manufacturer was only suitable at the initial stage of doing business. He observed that bicycles would no longer be for transportation only. It could also fulfil the needs for leisure, entertainment and exercises. At that period of time, the domestic-made products did not match with the changing market demand. He aimed at the domestic high-end market by launching his own branded product into the domestic market. Thus, the company upgraded from an original equipment manufacturer to an original brand marketer. Based on the positive experience

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in the domestic market, the company actively developed an overseas market with international dealers and distributors. The well-planned international marketing strategies made the companys brand known in the international markets. In order to have competitive edge over its major competitors, the company offered good services and better quality. The chairman contributed the success of the company to a well-defined corporate mission, appropriate target markets and having a balanced and integrated marketing plan that suited the changing environments. Be that as it may, the company had strong desire to become an original brand marketer. Thus, it exhibited a well-coordinated marketing strategy. The marketing practices of the Internet-based small firms are somewhat different. An owner-manager of a job search network company placed emphasis on market, competitors, service, customer and long-term planning at the beginning of his business. He said, At that period of time, newspapers were the only media for the job recruitment market. To the job searchers, it is inflexible; to the recruiters, it is inefficient. He identified the weakness of the traditional job search methods and found that the Internet offered a market niche. The company defined a very clear mission at the very beginning, Serve the job searcher with their greatest effort. We do not charge job searchers. In order to make the service more efficient and user-friendly, we categorize the job based on title, region and nature, and we provide newsgroup support for information sharing and exchange. At that time, there were a handful of competitors in the market. However, we finally strove to become the market leader. I raised a mortgage on my house from a bank to support the venture. I spent most of the money in advertising. Spending such a large amount of money solely on advertising at that time was rare. But, at that period of time, people were unfamiliar with the Internet. I tried to teach customers about how convenient the Internet was. Our website and services then became well known in the market shortly. This provided us a strong foundation to maintain the leadership position in the market. Although there were many companies, including foreign investors that tried to enter and wished to gain a share in the market, they could only target at the niche market and could not compete with us directly. The company provided a lot of information about the job market and the sales grew rapidly and became stable. Then, the Internet-based owner-manager diversified the services by providing continuous and further education information and offering training programs on interview skills. Developing the mainland China market became his future market. We do not think where is the market, we think where is the demand. Technically, our service is universal. Operationally, we localize our service. Apparently, the creative, integrated and professional marketing strategy contributes to company success. I am worried that we cannot provide creative service, the Internet-based owner-manager noted.

8. Conclusion The basic questions to ask are what marketing is in the Internet environment and to what extent will the Internet affect classical marketing theory. Chaffey et al. [32] argue that existing marketing theories can be applied in the cyberspace because the fundamental needs and wants of people have not changed. Thus, existing marketing theories remain valid, though practical implementation of the techniques may be different. Another question is to what extent the Internet marketing paradigm will be applicable in the small business environment, especially because the Internet could help market small-firm products and services with limited budgets. This research reveals that the traditional marketing tenets are applicable in the cyber environment. However, the research findings point to the importance of having knowledge in marketing and also to use professional marketing in business. The traditional small firms in Taiwan put most of their efforts in production and quality. In contrast, their Internetbased counterparts are marketing information and planning oriented. The new information infrastructure has changed the marketing environment. Should small firms wish to maintain competitiveness in the knowledge economy, they have to be more Internet based or computer mediated. Owner-managers have to learn intellective skills, as suggested by Zuboff [33], such as abstract thinking, inductive reasoning and having a theoretical framework to analyse information in order to applied computer-based technology to the traditional small business environment. The traditional brick-and-mortar companies are waking up to the fact that competitive survival in the New Economy depends on learning how to think and act like todays most successful dotcom companies. Thus, the traditional small firms should consider transforming into the market-driven learning organizations, as suggested by Day and Glazer [34], where flexible and responsive learning competence is a source of competitive advantage. Specifically, owner-managers need to upgrade competencies and develop expertise important to the effective delivery of the Internet marketing planning and implementation. The Internet-based environment will enable a more powerful knowledge exchange than before and the electronic connection of firms will facilitate the formation of strategic alliances. As business networks play an important role in Chinese business, the traditional Chinese small firms could make good use of their existing networks to develop strategic alliances as a competitive advantage in the Internet-based business environment. Also, the small Internet-based small firms have to respond promptly to environmental changes. This incidentally matches with the ideas of Bill Gates book Business @ the Speed of Thought [35] and fits well with Druckers traditional ideas of entrepreneurship [36] always search for change, respond to it and exploit it as an opportunity. Managers of large enterprises know that the Internet demands new business strategies. However, for many owner-manag-

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ers, much about Internet marketing and e-commerce remains enigmatic. Small-firm marketing educators may need to revise their curricula to provide a comprehensive framework for developing Internet marketing strategies that dovetail with the characteristics and limitations of small firms. Specifically, marketing tactics like benchmarking in competitive environments, personalised and incentivised promotion tactics, entrepreneurial marketing competencies and customer relationship management should be introduced. Aldrich [37] points to the lack of substantial assessment of the state-of-the-art of research on small business and entrepreneurship in regions other than North America and thus compares the differences between North American and European approaches in entrepreneurship research. Though Kaynak and Lee [38] comment that places like Taiwan and Hong Kong in the Pacific Rim will constitute an economic power comparable to that of North America and European, these places, imbued with Chinese culture, have not been considered as candidates for investigation and comparison. This paper attempts to provide answer to the question of whether the Internet-based small businesses are conducted with the same degree and type of marketing activities as the conventional brick-and-mortar small businesses do in a Chinese sociocultural context. As the population of Chinese in the world is about 20% of all humans, the research findings could provide valuable data about Chinese owner-managers in order to contribute to generalizability of theories in small business and entrepreneurship. However, the results should be interpreted with care. First, the sample is based only on anecdotes about successful small firms in Taiwan. The generalizability of the findings to Chinese small firms as a whole is limited. Future research may consider examining the Internet-based firms in Greater China including Hong Kong and China. Second, there are differences in the types of firm in the sample. Most traditional small business owners are manufacturers, whereas the Internet-based small firms are mainly service providers. As the undisguised stories were not written specifically for this research, some major issues, for example, branding, customer types and company performance, were not found. This prohibits further analysis to determine their effects on different marketing practices and approaches. Specifically, do these potential differences exist across firms in different industries? Are these potential differences a function of the type of firm (manufacturer or service provider), characteristics of the entrepreneurs (level of education and age), differences in the underlying economic system (free market vs. government controlled), differences in consumers expectations (judgement standard applied for different product classes) or differences in industry dynamics (old vs. new economy)? An exploration of hypothesised differences in the marketing practices of entrepreneurs of the Internet-based and traditional small firms would be an interesting area worthy of further investigation.

The evidence presented by Siu and Kirby [7] in using the contextual stepwise approach demonstrates that adopting a battery of both qualitative and quantitative approaches and techniques is useful to expand the frontier of knowledge of small Internet-based firms in a Chinese sociocultural context. Specifically, the contextual stepwise approach is a three-stage approach commencing with an exploratory qualitative research intended to develop initial insight into the marketing activities of Chinese small firms followed by quantitative research intended to identify the specific marketing practices. While the quantitative research strategies may be useful to identify the specific marketing practices, they are not necessarily appropriate when trying to determine how and why Chinese small firms perform as they do. Thus, in-depth personal interviews and ethnographic case study approaches are proposed as a complementary alternative in order to advance understanding of small firms. The present research, based on the content analysis results, will form a platform for undertaking the contextual stepwise approach to advance theory building in research into small firm marketing in the Internet-based environment.

Acknowledgments This research was partially funded by the Chiang Chingkuo Foundation for International Scholarly Exchange (RG002-D-98).

Appendix A. Undisguised stories used for the present study Stories about the traditional small firms in Taiwan 1. Xu, S.J., Metamorphosis of 21 Silkworms: The Case Studies of SMEs from Beginning to Success. Small and Medium Enterprise Administration and China Management Association, 1995. 21 undisguised stories, 17 used in this study. 2. Wu, B.S., Fight in Market: The Case Studies of How SMEs Tackle the Threat. China Management Association, 1995. 21 undisguised stories, 15 used in this study. 3. Xu, S.J., Change to Solve: The Case Studies of How Enterprises Break the Deadlock. China Management Association, 1995. 15 undisguised stories, only 5 used in this study. 4. Xu, M.L., Towards the Mountain Top: The Case Studies of How SMEs Create Competitive Advantages. Small and Medium Enterprise Administration and China Management Association, 1998. 21 undisguised stories, 12 used in this study. 5. Xu, S.J., Taiwan Dragon: The Successful Cases of How SMEs Upgrade and Change. Small and Medium Enterprise Administration and China Management Association, 1996. 20 undisguised stories, 17 used in this study.

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6. Lai, S.B., Taiwan SMEs: Advanced Models for Operation Management. China Management Association, 1993. 15 undisguised stories, 10 used in this study. 7. Lai, S.B., Win in the Battle: Twenty-One Enterprises Show Their Successful Strategies. Small and Medium Enterprise Administration and China Management Association, 1997. 21 undisguised stories, 18 used in this study. 8. Xu, M.L., Phoenix in Fire: The Case Studies of How SMEs Create Competitive Advantages. Small and MediumEnterprise Administration and China Management Association, 1999. 20 undisguised stories, 18 used in this study. * Duplicate stories are integrated into one unit for analysis. In total, 112 stories are used in this study. Stories about the Internet-based small firms in Taiwan 1. Lin, C.J., Handout of Internet Venturing. Taiwan: Media Workshop, 2000. 11 undisguised stories, 10 used in this study. 2. Chang, M.T., and Lin, S.L., Top Heroes of the Internet. Pin An Cultural, 2000. 17 undisguised stories, 16 used in this study. 3. Chang, K.H., Wu, M.C., and Chang, Y.Y., The Secrets of Successful E-Businesses. Unalis, 1999. 18 undisguised stories, 8 used in this study. 4. Wu, M.C., and Chen, K.S., The Way of Doing DOTCOM Business. EC Press, eds., 2000. Seven undisguised stores, seven used in this study. * Duplicate stories are integrated into one unit for analysis. In total, 26 stories are used in this study. Appendix B. Content analysis schedule Marketing Activities (please tick) Yes [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] No [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] []

Marketing Performance Scale (please tick) 1. Limitations of expenditure (an approximation of money/time spent on all aspects of marketing activity): [ ] minimal [ ] limited [ ] substantial 2. Limitations of expertise (the owners and others marketing background and the nature and amount of marketing education attained): [ ] minimal [ ] limited [ ] substantial 3. Limitations of impact (whether the company is known in the market and to what extent this knowledge or awareness has changed): [ ] minimal [ ] limited [ ] substantial 4. Level of generalization [ ] General concepts: a circumstance where the marketing activities carried out by a firm is a very general level, that is, it is closely identified with the general concept of marketing as described in the literature and will often not to be carried throughout into implementation. [ ] Industry specific: a circumstance where the marketing activities carried out by the firm is allied closely to that which happens throughout the firms industry. That is, it follows certain norms and practices peculiar to the industry. [ ] Situation specific: a circumstance where a firm will apply innovative and imaginative marketing designed to suit its own particular circumstances and requirements. 5. Planning vs. operations [ ] Minimal refers to a firm carries out little or no marketing planning but instead is concerned with the operation of marketing. Marketing operations activity will dominate the firms marketing behaviour. [ ] Balanced refers to some marketing planning is carried out at least once a period or on several occasion during a period. The balance does not refer to equality but an appropriately balanced between planning and operational activities. 6. Marketing planning adapted for small firm [ ] Limited adaptation is reflected in the process of a firm describes and uses marketing planning practices. That is, by using techniques, which are wholly unsuitable for small firms, such as general concepts, formal marketing plans, market share measurement, large mail shots or major media advertising. [ ] Substantial adaptation is indicated by the degree of refinement of marketing planning technique to suit the characteristics of the small firm and its particular circumstances. 7. Stages of marketing development [ ] Reactive stage is concerned with initial marketing activity. New firms enter markets and find customers in ways largely dictated by specific industry norm. The overriding common denominator for many new firms customers is that, in almost very case, they are known personally to the entrepreneur and initial transition have concentrated either by the firm making contact with the customer on a personal basis or vice versa. Therefore, marketing does not exist or at best is performed in a very

1 Customer relations 2 Advertising 3 Sales 4 Pricing 5 Market research 6 Sales forecasts 7 Sales control 8 Public relations 9 Product planning 10 Credit extension 11 Sales training 12 Quality control 13 Dealer relations 14 Sales recruiting 15 Product services 16 Product schedule 17 Inventory control 18 Packaging 19 Warehousing

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primitive fashion in most new firm start-ups. If the combinations of the marketing elements are satisfying a market need, the new start-up firm will probably benefit from word-of-mouth recommendations. [ ] Tinkering marketing can be defined broadly as marketing, which occurs because of the need to expand sales but is haphazard and disjointed, largely because it is carried out spasmodically and spontaneously. Examples may be embryonic brochure or leaflet, occasional advertising, local exhibition or sponsorship. [ ] Entrepreneurial marketing is defined as marketing, which is recognised for its value in generating sales but is carried out by the entrepreneur as part of his or her other activities. This marketing is characteristically instinctive and high risk. The performance of the small firm in marketing will thus depend to a large extent on the aptitude for marketing of the owner/manager. [ ] Proactive marketing is defined as methodical controlled marketing carried out by a marketing expert or specialist employed by the firm. The marketing activity will be characterised by a well-developed integrative and proactive approach where each activity will support the others and with the whole effort working toward the achievement of clear short-, medium- and long-term objectives (in other words, professional marketing). 8. Level of activity [ ] Little or no marketing (nonsimplistic) manifests itself in circumstance where firms are largely reactive to consumer inquiry. They have little or no knowledge of who their customers are or from where they come. [ ] Implicit and simple marketing occurs in companies as an instinctive activity. These firms do marketing as a natural part of business activity but their marketing remains fragmented due to lack of resources and knowledge of marketing activities in general. [ ] Explicit and sophisticated marketing occurs where companies do any marketing activity as part of a coordinated and integrated program with clear objectives and purposes. This need not be explicitly stated by will reveal itself in the way a firm describes a situation and in breath of marketing activities utilised. The classification can also be made to both external and internal considerations of marketing planning.

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