Microbusiness in the Global Economy: Using the Internet for Idea Driven Commerce

Dr Susan Dann and Dr Stephen Dann

Abstract

The nature of the Internet as a global market place for ideas has seen a rise in the number of small, medium and microbusinesses that are taking advantage of these opportunities. As a part of this new wave of idea driven commerce, there has been a rapid increase in the number of niche orientated products being developed by microbusinesses operating without much of the traditional overheads of small business. This paper offers an examination of the role of the Internet in the rise of globally oriented, idea driven commerce, and the presents an alternative way of thinking of about how these microbusiness entrepreneurs are engaging in their product marketing. Microbusinesses have been able to use the street level marketing approach to assist in the development of goods and services for a psychographic niche of which the microbusinessperson is a member.

Introduction

This paper looks at the role of the Internet in facilitating global microbusiness success by

maximising the advantages of delivering microbusiness idea-products through the Internet. It

also examines the value of the business to microbusiness market from both the perspective of

the microbusiness for channel control, and the commercial opportunities for the facilitator

businesses. Facilitator businesses are described as those on-line organisations that offer

business to business functions, such as printing and distribution, for idea products such as art,

music or entertainment. This paper also briefly explores the role that street level marketing

can play in aiding the global microbusiness.

Definitions

Microbusinesses are defined as SME business operations consisting of five, or less,

employees (Baldwin, 1999). For the most part, the microbusiness sector remains a largely

hidden organisational structure, as it has previously been encompassed by SME definitions,

which regarded businesses of between 1 and 100 employees as being of roughly equivalent

nature. However, with the rise in the number of SOHO (small office, home office)

businesses, and the increasing focus on small operator e-commerce projects, the

microbusiness is now a significant factor in global economics.

Characteristics of the Global E-Microbusiness

For the purpose of this paper, a global e-microbusiness is defined as an Internet based,

globally focused business organisation consisting of less than five employees. In order to

qualify as globally focused, the microbusiness must either directly ship products to

international markets, or make use of an international distribution mechanism, which allows

for global access to their products (Dann and Dann, 2001b). For example, a microbusiness

based in Los Angeles must make their product available to buyers beyond the American

border in order to qualify as a global microbusiness (ie: if shipping restrictions to US

Mainland only exist then it cannot be classified as global). However, an Asian microbusiness

that uses a US based distribution service, shipping exclusively to the US mainland, does

qualify as a global microbusiness. The distinguishing factor is the distribution of the product

outside the country of origin of the microbusiness.

Nature and Structure of Idea Driven Microbusiness

Given the nature of the Internet as a medium of idea exchanges, one of the most common

aspects of e-microbusiness is the provision of idea driven e-commerce (IDE). Idea driven

commerce has been used to describe those categories of products that are based on eliciting

emotional responses from consumers – for example, art, graphical imagery, audiovisual or

interactive experiences. For this paper, (IDE) will be limited to those products which are

distributed through the Internet, and which are designed to elicit a cognitive-emotive response

from an end consumer.

Microbusiness Outcomes: Idea Products and Services

So what then are the most common forms of cognitive-emotive idea products that are

distributed on the Internet? There are four main types of products that are best suited to the

current conditions of the Internet, and these are digitised art, music, interactive software and

web sites. Digitised art includes any artist or design work that can be viewed digitally, and is

available for sale commercially as either a printed work or permanent assignment of digital

reproduction rights. This limitation to the product removes any non-commercial artist work

from consideration as part of the microbusiness portfolio. Similarly, the on-line distribution

of music requires that the music be available for sale in a commercial form (either as licensed

download, free sample of a commercially available album) to limit this application to those

bands or musicians using the Internet as a distribution outlet for commercial gain. Interactive

software includes those programs made available under commercial agreements, shareware

arrangements or any public licence that does not exclude commercial revenue from the sale of

the product. Finally, the microbusiness web sites are those web sites that provide content for

the intent of commercial gain, either through the sale of support merchandises, direct

subscription or advertising revenue. This paper is focused on digitised art and music services,

thus interactive software or web sites fall beyond the scope of the study.

Factors in Global Microbusiness Success

Despite such a variance in the type and nature of the global microbusiness, there are a series

of common factors that increase the likelihood of success for these operations. Initially, as

with businesses of any size, an e-microbusiness must have a business focus including the need

for the use of marketing. In addition, global e-microbusinesses need to consider their

distribution strategies for accessing their global target markets. For example, they may need

to consider whether they are inside America looking outwards, or outside America using the

Internet to access the US market. Finally, the e-microbusiness operator needs to examine

whether to use their own distribution mechanism, or to make use of an existing business to

business distribution channel.

The Street Level Marketing Paradigm

Street Level Marketing (SLM) is a new conceptualisation of small and medium enterprise

marketing that represents those entrepreneurial marketers servicing the needs of their own

niche-market community by delivering products that were developed within their community

(Dann and Dann 2001a). It is a technique especially suited to the microbusiness community,

as many exist to service smaller intra-niche markets. For example, a microbusiness could be

founded around the development of a piece of software (e-mail client) to meet a specific niche

need (multiple e-mail account handling) after the programmer could not find an existing

product. In the broader microbusiness sense, SLM represents a movement away from the

established belief that all marketing must be based on a top-down “research and discover

target needs, then develop products to match the needs” approach used by larger

organisations. Instead, this approach validates the marketing methods of the entrepreneurial

marketer who focuses on developing products to service their own needs first, and then

expands the application of this product to people with similar needs inside their market niche.

SLM Expanded

SLM expands into a series of sub-elements which operationalise the concept, which are

illustrated in Figure 1 (Dann and Dann 2001a).

Figure 1 Components of Street Level Marketing

MarketingOrientation

Marketing Philosophy

Marketing Intelligence

Marketing Research

Marketing Activities

Source Credibility

Street Credibility

Credibility

Self belief

Product belief

AidmheilMarket

Immersion

The central tenet of SLM is the need to use the principles of marketing in the operation of the

microbusiness. In this context, marketing is seen as the ability to recognise that the product

was developed to solve a personal need, has a wider application in the community, and can be

tailored to best suit the needs of the niche. The four elements of the marketing orientation

include the need for the microbusiness to engage in marketing activities, use the marketing

philosophy, gather marketing intelligence and engage in some forms of marketing research

(Doyle and Wong 1998; Gray et al 1998). For a business that consists of five or less people,

these tasks are usually handled as an informal part of the daily operations, in that a client

focus can be easily maintained (marketing philosophy in action) when the members of the

microbusiness are developing their product for their own needs. Similarly, marketing

research in this context is both quantitative where necessary, but primarily reliant on

secondary data or qualitative research. Customer feedback in microbusiness organisations is

usually directed straight to the person responsible for implementing the suggested changes.

Market Immersion is the second element of the SLM technique. This formally recognises the

involvement in the market niche as a criteria for success as an SLM business. Where a

microbusiness is focused on delivering a product to a target market, their level of market

immersion is critical in determining whether SLM is applicable. Those microbusinesses that

target external markets are not part of the SLM process, and must be examined under

conventional marketing techniques. The value of market immersion for the microbusiness

comes from inherent knowledge of the needs of the marketplace from personal experience,

informal information networks and a marketplace reputation. Reputation within the niche also

forms a part of the credibility of the product and microbusiness engaged in SLM.

Credibility splits between the source credibility theories of advertising and promotion, and the

street credibility of the microbusiness (Garbino and Johnson 1999). Street credibility is the

combination of personal and corporate reputation, perceived expertise, social network capital,

market mavenism (Feick and Price 1987), target market empathy (Andreasen 1994, Walker

Langmeyer and Langmeyer 1992) and peer group respect. The value of street credibility

extends beyond the professional reputation of the microbusiness through to the personal

reputations of the staff of the business, and their dealings with other members of the niche.

The final element of SLM for microbusinesses is the notion of aidmheil, which is the notion

of faith in the product and self belief and belief in the potential success of the microbusiness.

Faith in this context is not associated with a religious experience or belief structure (although

it can help when running a microbusiness). Instead, this is a formal recognition of the need

for a level of personal confidence in the product and a self confidence in the microbusiness’s

ability to deliver on their promises (Flores 1998). Quite often this is reflected in the personal

mission statements of microbusiness operators who express an inherent faith in their product,

or a belief in their eventual success. The aidmheil of a microbusiness can also be represented

through the owner-operator’s willingness to undertake the higher risks of small business

operation and working for themselves instead of working for another organisation.

Gaining an Internet advantage for SLM Microbusinesses

Having proposed that a microbusiness, using an intra-niched focused SLM tactics, can use the

Internet for servicing a global market niche, how can these businesses gain the maximum

effect from their on-line presence? Tetteh and Burn (2000) proposed a six point structure for

maximising on-line effectiveness for SME marketing. These are:

• Define clear goals for being on-line. For the e-microbusiness, an on-line presence should

be established with a series of goals and objectives in mind for two reasons. First, clear

goals are needed to plan the development of the microbusiness and its on-line presence.

Second, set goals allowing for calculated strategies in developing on-line networks,

business relationships and determining what infrastructure is needed to service the

targeted global on-line niche.

• Develop infrastructure that adds value to the business. Microbusinesses are restricted in

the degree to which they can extend their organisational capacities before moving into the

SME category, or losing sight of their core business. Microbusinesses are advised to only

add those functions to the e-microbusiness that result in an increase in value – for

example, a microbusiness that uses the Internet to conduct wholesale transactions with on-

line retailers does not need to develop their own on-line retail outlet.

• Incorporate and install networking features between stakeholders. For intra-niche targeted

products, this can be as simple as creating a means of communication and exchange

amongst niche market members through a discussion forum. Above all, the priority

should be to create a network of value between all of the relevant stakeholders, such as the

end users and the product manufacturer’s support staff (where the microbusiness is a

retailer), or between the microbusiness’s product designer and the retailers.

Microbusinesses based around entertainment products such as music or literature often

develop extensive networks between client-users (their fans) and client-distributors (live

music venues / book stores).

• Use the virtual infrastructure to create virtual values of process, product and image.

Process values involve using the on-line infrastructure to give greater depth and detail to

the on-line product – for example, a microbusiness that creates specialist wood souvenir

carvings can contain additional information on the history of the art, links to further

information, and even a discussion forum for other artists. This develops a sense of value

for the customer in visiting the virtual infrastructure and encourages repeat visits. It also

serves to enhance the reputation of the product through enhanced corporate image for the

microbusiness. Virtual infrastructure can also be used as the basis of cybercommunities,

which can create a strong loyalty to the product, web site and microbusiness (Dann and

Dann 2001b)

• Cultivate a virtual culture for the microbusiness’s clientele. Given that an SLM

microbusiness will be dealing in a marketing niche in which it, or the member staff, will

have personal relationships and networks, this aspect is a valuable reminder to encourage

those members of the target market to continue their interaction with the microbusiness

on-line. In addition, as mentioned above, cybercommunities can enhance the value of the

microbusiness by creating a supportive community of product users, who can also

contribute to the ongoing development and refinement of the microbusiness products

(Dann and Dann 2001b). By developing a virtual culture that supports the microbusiness,

it also serves to enhance and expand the potential target audience from the initial niche,

through the extended on-line social networks of members of that niche. One significant

advantage of the Internet over classic distribution channels is the ease with which a niche

product can expand its market via a horizontal spread through informal social networks of

the primary target niche (Cothrel and Williams 1999).

• Continual response: The final and most essential element of the on-line existence of the

microbusiness is the need for continual monitoring and response to market changes. A

hallmark of the SLM process is the use and reliance on constant feedback from fellow

members of the market niche as they use and refine the product to meet their needs. This

is one area where the microbusiness has the significant advantage of flexibility and speed

of response to changing conditions as it relies on (at most) an initiator convincing four

other people to respond to a stimulus. This allows for much faster response times

(particularly for solo operated e-microbusinesses) that can begin production of new ideas

immediately, when compared with slower requests for formal permission to expand the

product line. In this way, most microbusinesses have similar characteristics to

entrepreneurs when it comes to responses to environmental change and stimuli (Collinson

and Shaw 2001)

Microbusinesses can benefit significantly from engaging in structured and deliberate use of

the Internet to maximise their exposure to their target niche, and to gain the maximum

outcome for their on-line efforts. Part of this, however, also requires an important initial

decision process of determining what role the Internet will play in the product distribution

strategy.

Microbusiness: Market Access through the Internet

Selecting the market access to be gained through the Internet returns the discussion to the

notion of idea driven commerce, and how ideas can be moved across national boundaries

through e-commerce. It also poses the question of how the Internet will be used – is it used as

a mechanism to reach a global audience, or is it being used by a global company to reach an

American (or equivalent single nation) target market? America is singled out in this context

for the number of Internet based product distribution services that are located within the US,

and that provide considerable cost advantages for delivering into America (it is noted that an

American company distributing into America as part of a global distribution plan remains a

global microbusiness. It is only where the primary, or sole target market is sourced from the

same nation as the microbusiness’s country of origin, that the microbusiness cannot be

classified as a global entity).

Global reach to access Global markets

The first and most touted use of the Internet for global marketing has been its role as a low

cost, highly accessible global network of exchange (Javalgi and Ramsey 2001). From the

perspective of the e-microbusiness, the Internet offers global access to either the

microbusiness’s web site, or to a microbusiness facilitator’s web site (see below). Issues of

the removal of geographic and time constraints associated with physical store locations give

the microbusiness a much greater level of independence in their production and distribution of

idea products.

Global Reach to Access USA Market

An alternative view of the role of the Internet arises from the current dominance of the

American marketplace in their minds of many of the e-commerce marketers, a number of

facilitator companies that have geographically limited distribution networks, and numerous

trade laws that restrict the movement of certain goods produced in the USA. Rather than

seeing the limitations of American based products as flaw in the global e-commerce economy,

many international microbusinesses can use these services as a method of entering the

American market. For example, a graphics designer working in Puerto Rico designing

products with an Hispanic focus can access US based print companies through the Internet,

and facilitate an entry into the American marketplace that would otherwise be difficult to

achieve from their home country. Similarly, non-American musicians can distribute their

work through American based music web sites without requiring work visa or permits that

would be needed to tour America, or an importer to bring the music content into the USA.

Consequently, the Internet significantly lowers many of the entry barriers faced by

international microbusinesses in entering US markets.

Microbusiness Facilitators: Microbusiness to Business Commerce

The ultimate value of the Internet for many microbusinesses has been access to a range of

intermediary business to business service providers. The ultimate irony of the Internet has

been the rise of the very intermediary channel that it was alleged to have been capable of

eliminating. Business to microbusiness commerce has flourished, as idea based commerce

providers can create economies of scale in storing, processing and dealing in idea products.

One aspect of the rise of the idea product, and the growing success of the business to

microbusiness relationships has been the ability of digital products to be reproduced in almost

limitless supply without exhausting the original product.

Additionally, the digital product is able to be transferred without recourse to conventional

product distribution channels, and usually through a range of automated processes (preset

upload scripts where the microbusiness controls the input of the content). The increase in

self-service B2B systems works to the advantage of microbusiness operations, as the content

creator of the uploaded materials is usually also responsible for the product pricing and

description. Compare this to a process where the creator hands over their work to a printer,

who produces the products for a wholesaler, who then onsells to a retailer, who writes the

product description and sets the price, and this is then conveyed to the target market via public

relations and advertising. In niche products, particularly SLM based products where street

credibility and source credibility are important factors for success, it is important to have the

shortest viable chain from product producer to product user (preferably the product producer

should also endorse their product by being a product user as well). The automation of these

processes also works to the advantage of the consumers, who can access the microbusiness’s

product without needing to rely on the availability of the microbusiness owner.

Case Studies of Microbusiness Facilitators

The final element of the paper examines a brief series of case studies of three different forms

of on-line microbusiness idea product facilitators. These are:

• music distributors

• short order merchandise; and

• graphical design printing and production

Global Music Marketplace – MP3 Distribution

Perhaps the most infamous use of the Internet as a distribution mechanism was the rise in peer

to peer file sharing during the late 1990s with services such as Napster and Gnutella. Whilst

the majority of public attention for these services was focused on the illicit trade of copyright

materials, these peer to peer services also presented new delivery alternatives for copyright

owners wishing to distribute samples of their work. In addition, the recent redevelopment of

Napster into a fee paying content search service (partnered with Bertelsmann) permits the

opportunity for musicians operating as a microbusiness to use the service to sell their

independent music product through Napster (IUMA 2002). Microbusinesses hosting content

through IUMA can rely on the service to act as an agent, distributor and collection agency for

their products that are distributed through the Napster subscription service.

The independent music industry is also strongly associated with SLM business and

microbusiness productions in that many musicians produce music products for their own

niche (eg surfers producing surf music, DJs developing turntable equipment), or provide

microbusiness services such as small scale recording studios or video productions to fellow

artists.

Just in Time Microproduction – Delivering to a Market of One

Associated with the development of microbusiness music producers is the concept of just-in-

time microproduction, which is designed to service the product needs of the microbusiness

sector. One on-line music host, MP3.com, provides just-in-time production of short runs

(include individual pressings) of mixed media audio and data CDs for the microbusiness

musicians using their site. Similarly, other microproduction services such as Cafepress.com

produce short run merchandise for microbusiness clients. The Cafepress service hosts the

microbusiness user’s images associated with a range of products (eg mugs, shirts, mousepads

and hats), and also provides secure on-line purchasing arrangements for the store. The

microbusiness owner provides the graphical content for the products in a non-exclusive

licence arrangement, and the Cafepress site provides the production, on-line store, and

shipping for the microbusiness.

On-line Art Production- Idea Driven Commerce

The third aspect of business to microbusiness support is the manufacture of idea driven

commerce products by enterprises such as Zazzle.com. The Zazzle site provides on-line

hosting for high resolution graphics that can be purchased through the site as posters printed

to either high resolution paper or direct to canvas. One of the key points of the service, which

they highlight to potential customers and users, is that they see their role as enablers of idea

commerce by providing the intermediary function of production and shipping for digital

content. Microbusinesses using this service can focus on the production of the idea content

(artistic work) without needing to develop extended supply chains of printers, art exhibitors

and distribution networks. The Zazzle service also facilitates niche orientated art publishing

by offering a key word (up to 9 per image) search mechanism, and up to four genre locations

(eg landscape, religion, patriotic, college life) in order to unite similar art and artists, as both a

convenience to the consumers using the service, and the intra-niche focused microbusiness

artists.

The essence of these services is to provide economies of scale to collective groups of

microbusinesses by diffusion of establishment costs of capital equipment across a wide range

of product users. Systems such Zazzle and MP3.com allow the microbusinesses to produce

just-in-time products without the expense of start up costs, or the need to sink large amounts

of capital into product stockpiles

Conclusion

The emergence of facilitator organizations on the Internet opens up a vast array of marketing

opportunities for micro businesses. The global nature of the Internet brings with it potential

for global expansion, although in the past, the logistics of shipping world wide were often

beyond the scope of micro businesses. Having access to products sales website that could not

deliver the products was more likely to cause frustration for out of range potential customers

than to make sales. Recognising that many micro businesses are intra niche operators,

traditional marketing models are of little relevance as they assume a level of resourcing for

marketing activities that is unrealistic. Consequently the street level approach appears most

relevant to their needs.

The emergence of the successful new model of on line facilitator organizations

simultaneously overcomes problems of marketing, production and delivery for globally

focused micro businesses. Assuming the continued development and acceptance of facilitator

organizations on line, barriers to entry for small businesses, particularly into difficult to enter

markets like the US, will continue to be substantially reduced. Further the new business

model of just in time off shore manufacturing opens up new opportunities for a variety of

creative micro businesses. This paper has outlined some of the current developments in this

field and provides a basis for future comparison as the global micro business develops as a

future trend in international commerce.

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Web sites

www.iuma.com

www.mp3.com

www.cafepress.com

www.zazzle.com/welcome/home/default.asp