The Effectiveness of using Online Application in

Improving Micro, Small and Medium Enterprises

(MSMEs) Performance

Rini Indahwati

1,2

, Nurlinda Nurlinda

1,2

, and Wardayani

1,2

Politeknik Negeri Medan, Medan, Indonesia

STIM Sukma, Medan, Indonesia

cici_wardayani@yahoo.co.id

Abstract. This study aims to see the effect of the effectiveness of the use of

online applications (go-food) on the performance of Small & Medium Enter-

prises (SMEs) in the city of Medan. The use of online applications is measured

through (1) online communication channels; (2) online promotion channels (3)

online supplier distribution channels; (4) online sales channels (5) online trans-

action channels. Meanwhile, SMEs performance is measured through (1) cus-

tomer satisfaction; (2) sales growth; (3) employee growth; (4) market share.

Keywords: Effectiveness ꞏ Online application ꞏ Performance

1 Introduction

Online-based technology is increasingly in demand. Data e-Marketer (2018) states that

internet service users in Indonesia continue to grow. According to these data there has

been an increase in internet users since 2013. The data recorded showed that as many

as 72.8 million internet service users, where the number continues to increase in 2016

to 102.8, and 112.6 million in 2017. Data released by Bank of Indonesia estimates that

24.7 million people from internet users do online shopping transactions. The value of

the transaction is estimated in 2018 to reach 144 trillion.

The rapid development of online business by offering various facilities, time effi-

ciency, energy efficiency and cost efficiency is certainly a good opportunity for the

development of Micro, Small and Medium Enterprises (MSMEs). Referring to the data

of MSMEs in Indonesia, as many as 8.7 million MSMEs are potential for the economic

sector. Small and medium Enterprises (SMEs) have become a vital economic sector in

competitive economic development, even in Indonesia the source of community eco-

nomic livelihood depends on this sector. SMEs in Indonesia are concentrated in the

trade sector, such as "food, processed food, textiles and garments, wood and wood

products, as well as mineral and metal and culinary production".

A research that has been conducted by Utomo [1] found that business utilization

using online technology can improve business performance. Utilization of online tech-

nology will ultimately open up opportunities and conveniences for SMEs in improving

business performance. Research conducted by Misnawati & Yusriadi (2018) explains

that the opportunities for sophisticated digital technology will have an impact on the

758

Indahwati, R., Nurlinda, N. and Wardayani, .

The Effectiveness of using Online Application in Improving Micro, Small and Medium Enterprises (MSMEs) Performance.

DOI: 10.5220/0010528800002900

In Proceedings of the 20th Malaysia Indonesia International Conference on Economics, Management and Accounting (MIICEMA 2019), pages 758-765

ISBN: 978-989-758-582-1; ISSN: 2655-9064

ease of managing a business in order to increase sales profits [2]. The findings of re-

search conducted by Zulfikar & Supriyoso (2019) found the results that online sales

were effectively carried out well [3]. Utilization of online business sales even increased

sales by 80% compared to manual business sales which only amounted to 20%. Alt-

hough there is a significant increase there are obstacles in utilizing online sales, one of

which is the initial sale there is consumer distrust in the products offered online. Lack

of references to products that cause consumers to distrust vendors who sell online.

Arisandi's research (2018) found that the use of e-commerce can increase business

productivity and endurance of the flip business and increase sales [4]. Based on this

background, this study will explore the effectiveness of using online applications at

MSMEs in the city of Medan.

2 Theoritical Review

2.1 Effectiveness of using Online Applications

The most technological invention of transformation today is the internet (The-Econo-

mist, 1999). The internet is believed to be the basis for potentially changing business

paradigms that have an impact on every corporate value chain link [5]. The facilities

provided by the internet to support business activities such as the availability of web-

sites, blogs, social media. Where the devices provided are global and real time as well

as practical in supporting business activities such as promotional activities that are more

leverage and broad reach. Utilization of online applications will accelerate the dissem-

ination and exchange of information up to date.

Online applications will have an impact on business operations and marketing ac-

tivities for customers through three marketing channels namely, "communication chan-

nels, whose main function is to inform buyers and prospective buyers about the availa-

bility of products / services and seller attributes that enable buyers and prospective buy-

ers to communicate with sellers, the transaction channel, whose main function is to

facilitate economic exchange between buyers and sellers, the distribution channel,

whose main function is to facilitate physical exchange[6]. By using an online applica-

tion, the company will immediately be accessed by potential customers who use the

application. All information provided by the company will be accessible to potential

customers in realtime. Thus the use of online applications will streamline activities that

are the company's goals.

Understanding the effectiveness cannot be separated from how successful the target

has been achieved. Effectiveness can be related to achievement in terms of quantity,

quality or related to time. Measuring effectiveness can be interpreted by comparison

between targets and achievements, where the better the achievement of the targets, the

higher the effectiveness [7].

Effectiveness is the ability to achieve targets that have been set [8]. Sales effective-

ness is the ability to sell every unit of goods produced and resell items purchased in

order to achieve the objectives set [8]. Thus it can be said that sales effectiveness is a

comparison between sales targets and the realization obtained (Akmal, 2006: 37).

The effectiveness of using online applications can be interpreted as how effective

the process of online applications to increase sales. The use of online applications (e-

The Effectiveness of using Online Application in Improving Micro, Small and Medium Enterprises (MSMEs) Performance

759

marketing) is an act of using the web in marketing products and services to custom-

ers[9]. Through the use of web media marketing activities in the form of transactions,

payments, advertisements and promotions can be done, obtained by users by accessing

information anywhere via internet-connected devices Indicators used regarding online

applications consist of, (1) online communication channels, (2) online promotional

channels (3) online supplier distribution channels, (4) sales channels online (5) online

transaction channels[6].

2.2 The Performance

Performance is interpreted as a level to meet expectations associated with its func-

tion[10]. This expectation relates to its function in the organization. Managerial perfor-

mance is "one of the factors that can increase organizational effectiveness. The perfor-

mance of managers in carrying out tasks and actions are grouped according to section

functions" [11]. The functions and divisions are divided into several centers of respon-

sibility consisting of investment responsibility centers, profit centers, cost centers and

revenue centers Mahoney et al (1963) in Soleman (2012)[10]. Manager performance is

"the ability of managers to carry out their responsibilities on product quality, product

quantity, product timeliness, new product development, personnel development, budget

achievement, cost reduction (increase in income), and public affairs "[12].

The purpose of organizational effectiveness shows how important business perfor-

mance is. Furthermore, the company's performance according to (Soininen, Mar-

tikainen, Puumalainen, & Kyläheiko, 2012)[13] is "an indicator of high profitability

and market share growth where the growth of the two measurement indicators is an

essential part of the company's performance and is used to evaluate the competitiveness

of the company". In general there are two indicators that are able to describe business

performance as part of (a) financial performance (such as, sales increase performance,

ability to get profits, etc.); (b) operational performance (market share growth, new prod-

ucts, product quality, marketing effectiveness and value added)[14]. Business perfor-

mance indicators consist of "(1) sales growth; (2) customer growth; (3) profit growth;

(4) growth of working capital " [15]. Financial performance is the extent of financial

efficiency and profit size. While non-financial performance is operational performance

that includes "(1) customer satisfaction; (2) sales growth; (3) employee growth; (4)

market share [16].

2.3 Effect of Effective Use of Online Applications on Business Perfor-

mance

The approach taken through online applications brings several advantages for MSMEs,

especially in increasing sales, increasing customer interest and attention, increasing ref-

erences in innovation [17]. The use of online applications helps small entrepreneurs to

improve the way they communicate and interact with customers, increase sales of prod-

ucts and services through effective marketing, and build better relationships between

suppliers and costomers [17].

The results showed that there was a positive influence on the application of online

applications to the business value of Wade, Johnston, & McClean [18], while Utomo

MIICEMA 2019 - Malaysia Indonesia International Conference on Economics Management and Accounting

760

[17] found that the use of business using online technology could improve business

performance. Research conducted by Misnawati & Yusriadi [2] explains that the op-

portunities for sophisticated digital technology will have an impact on the ease of man-

aging a business to increase sales profits, while Zulfikar and Supriyoso [3] find the

results that online sales are effectively implemented well. Arisandi Research [4] found

that the use of e-commerce can increase business productivity and endurance of the flip

business and increase sales. Then Doherty, Ramsey, Harrigan, & Ibbotson [19] found

that "MSMEs that adopt and use broadband internet technology encourage efficiency

and strategic development on a daily basis.

Referring to the explanation above, the research hypothesis is:

H1: The effectiveness of using online applications has a positive and significant

effect on performance.

3 Methods

3.1 Measurement and Observation Parameters

Variables observed / measured.

3.1.1 Effectiveness of using Online Applications (X1)

The effectiveness of the use of online applications is how effective the process of online

applications is to increase sales and the convenience provided by the internet to support

business activities such as the availability of websites, blogs, social media. This varia-

ble is measured by indicators adopted by Peterson et al [6] consisting of "((1) online

communication channels, (2) online promotion channels (3) online supplier distribution

channels, (4) online sales channels (5) transaction channels online Variables will be

measured using a Likert scale with a score from 1 to 5.

3.1.2 Performance (Y)

Financial performance is the extent of financial efficiency and profit size. Business per-

formance indicators consist of "(1) sales growth; (2) customer growth; (3) profit

growth; (4) working capital growth " [15], while operational (non-business) perfor-

mance consists of" (1) efficiency; (2) customer satisfaction. Variables will be measured

using a Likert scale with a score from 1 to 5.

3.2 Research Models

The model used,

The model used in this study can be described as follows:

The Effectiveness of using Online Application in Improving Micro, Small and Medium Enterprises (MSMEs) Performance

761

Picture 1.

The statistical formula used: Y = a + X + e

Information :

Y = Performance

X = Effectiveness of using online applications

3.3 Research Design

Research design,

1. Determine the population and sampel

The population is all MSMEs using Go-Food applications in Medan City. The popula-

tion is 500 (five hundred) MSMEs. The sample is determined using the Slovin method

with total 222 samples.

3.4 Data Collection and Analysis Techniques

All statement instruments will be measured using a Likert scale. Likert scale is a meas-

urement scale used to measure the attitudes, opinions and perceptions of a person or

group of people about social phenomena [20]. Measurement of variable indicators in

this study, answers to positive and negative questions are made in five assessment

weights, namely:

a. Strongly disagree weighting 1

b. Disagree weight 2

c. Neutral weights 3

d. Agree weights 4

e. Strongly agree weight 5

The selection of the right measuring instrument will determine the validity or valid-

ity of a research result. Mistakes in choosing a measuring instrument will cause the

results obtained will not describe the real situation. Sekaran [21] states that to overcome

this, two types of testing are needed, namely the test of validity and the test of reliability

used to test the sincerity of the respondents' answers. Data processing devices in the

equation model in this study use PLS.

(X)

Effectiveness

of using online ap-

(Y)

Performance

MIICEMA 2019 - Malaysia Indonesia International Conference on Economics Management and Accounting

762

4 Results and Discussion

4.1 Descriptive Data

Based on the Table 1, it can be seen that the majority of respondents are male. The

education level of most respondents is high school. The length of effort that has been

undertaken by the majority of respondents is 5-10 years. The average sales per month

of the majority of respondents is 2 to 5 million per month. While there are still 77% of

respondents who do not have a TIN. And the majority of respondents have used Go-

Food for>1 year.

Table 1. Descriptive Data.

No Description Frequency Percentage

1 Gender

Male 161 64%

Female 60 36%

2 Degree of Education

High School 173 69%

Diploma 62 25%

Graduate 15 6%

PostGraduate 1 0%

3 Business time span

<5 yea

76 30%

5-10 yea

168 67%

>10 yea

73%

4 Monthly Sales

< 1million 1 0%

–

million 63 25%

–

5 million 138 55%

–

10 million 44 18%

> 10 million 5 2%

5 Have Tax Registration Number (NPWP)

Yes 58 23%

No 193 77%

6 Time length of using go-food services

< 1 Yea

52 21%

> 1 Yea

99 40%

4.2 Data Analysis

Fig. 1. Path Analysis.

From the picture above it can be seen that the indicators that make up the effective-

ness variable are:

1. The go-food application helps in selling the respondent's products

2. The go-food application helps in introducing respondent products

3. The go-food application helps in increasing respondents' product sales

4. The go-food application helps to find out the total product sales of the respondents

The Effectiveness of using Online Application in Improving Micro, Small and Medium Enterprises (MSMEs) Performance

763

However, go-food application does not help in the process of purchasing respondents'

raw materials. So that the 3rd indicator that is helping in purchasing raw materials must

be eliminated, because it is proven to not form the effectiveness variable.

Meanwhile, the indicators that make up the performance variable are:

1. Increased profits (profits)

2. Increased sales

3. Increased customers

And, indicators of capital increase and expenditure reduction do not have enough Ioad-

ing factors to form performance variables so they must be removed from the model.

Table 2. Data Analysis.

Adjusted R square P-value T-statistics

Effectiveness -Performance 0.366 0.000 11.734

Based on the above table, it can be seen that the amount of adjusted R-square be-

tween the effectiveness of using online applications with performance is 36.66%. This

means that every time there is an increase in effectiveness by 1 (one) standard deviation,

the performance will increase by 36.66%.

The table above also shows that the effectiveness of using on-line (go-food) appli-

cations can improve the performance of MSMEs in Medan. The effectiveness of using

an online application is measured through:

1. The go-food application helps in selling the respondent's products

2. The go-food application helps in introducing respondent products

3. The go-food application helps in increasing respondents' product sales

4. The go-food application helps to find out the total product sales of the respondents

Meanwhile, MSME performance is measured through:

1. Increased profits (profits)

2. Increased sales

3. Increased customers

5 Conclusions

Based on research gaps, literary studies, data processing and analysis, it can be con-

cluded that the use of online applications (go-food) in small and medium businesses in

the culinary field has an effect on improving the performance of MSMEs in Medan.

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