PHILIPPINE ENTERPRISES SALES CHANNEL EXTENSION

John Robert F. Isip and Marilyn F. Isip Polytechnic University of the Philippines Graduate School. ...................................................................................................................... Manuscript Info Abstract ......................... ........................................................................ Manuscript History Received: 10 May 2020 Final Accepted: 15 June 2020 Published: July 2020

In the advancement of every after generation, people today are constant in using high-technology gadgets in almost all sort of activities. Embracing digital intervention to gain demand from the market is considered as one of the sales channels that helps to sustain the business' growing profit in the market. Yearly, the projected income of the e-commerce industry is continuously growing. Shopping via online has been a trend among modern Filipino customers due to a number of factors such as convenience, low price, easy access to variety of products, and several online promotions. Yang et.al (2011) extended these studies highlighting the effect of customer's channel extension behavior to the shift of perception of an organization towards the online channel. With this, the study is conducted to determine the perception of the business owners in extending their business sales channel and discuss the business performance from offline to online store. This research applies the research model presented by Yang et. al (2011) and uses data collected from MSME owners in Robinsons Place Novaliches. Perceived service quality, perceived entitativity, and selfefficacy for change of MSME owners are measured according to the model to understand their perception on business sales channel extension. In turn, results gathered indicated that the respondents have the willingness to extend their sales channel but has lingering doubts about it. Theoretical and statistical treatment are discussed throughout the study.

…………………………………………………………………………………………………….... Introduction:-
The Internet, as the most significant technological phenomenon today, provides competitive opportunities to firms (Othman, et.al, 2010). Businesses of all sizes have the opportunity to build competitive advantage with the use of internet. The main purpose of using the web is to increase sales, profits and decrease costs in negotiating a purchaseand-sale transaction (Koon Ang S., & Husain, W., 2012). Online channels can increase in sales due to increasing penetration of the Internet worldwide (Schubert, P. et. al., 2011). Opening an e-business keeps the business in touch with what's current and levels the playing field and gives SMEs the resources needed to compete in today's increasingly digital marketplace (Tan, G., 2012).
The aim of adopting e-business is to improve the firm's competing ability, since businesses are being competition focus (Xiaoming M., 2010). Increasing global competition has led businesses to consider e-business strategies. Ebusiness technologies present unique opportunities and challenges for businesses, and Small & Medium Enterprises (SMEs) are no exception (Elragal, A. and Abouseif, H., 2011). Early adoption of these technologies can give an SME a competitive advantage that is sustainable (Goessl, L., 2001).

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Most SMEs do not know how to utilize e-business platforms, nor are they aware of the various forms of education available to become proficient in media. The only SMEs that have fully engaged in highly complex applications are those that are imbedded within a client or supplier chain network and were required to be compliant with the best practice e-business applications of these larger companies (Xu, Rohatgi &Duan, 2007, p.83).

Relative Advantage on E-Commerce Implementation:
In the literature, relative advantages have been identified as an important factor affecting implementation of ecommerce in SMEs (Baldwin, Lymer and Johnson, pp. 109). Relative advantage is the strength in which a new product is more of an advantage than other existing brands. Increased of sales, improved communication with customers, suppliers and employees, and easier order tracking are said to be the Relative Advantages of E-Commerce (Baldwin, Lymer and Johnson, pp. 109), which has a positive association with the MSMEs implementation of E-Commerce.

Top Management Support to IS/IT Adoption:
Previous research studies indicate that top management support has been an important factor in Information System/Information Technology (IS/IT) adoption and the chance of SMEs to adopt new technologies are lesser without the said support (Ramdani and Kawalek, 2007). Hameed et. al (2012) stated that top management support is one of the significant factors on both product and process innovation of IT adoption. Furthermore, Kutlu and Ozturan (2008) indicated that business owners and managers with positive attitude towards Information Technology (IT) tend to be more successful in adoption and implementation of new technology with the evidence from SMEs. Research study from Young and Poon (2013) showed that top management support is a more significant and sufficient critical factor for success than other factors.

Product Pricing of Online vs. Traditional Retailers:
According to Nair, previous and recent studies on product pricing between online and traditional retailers had shown different statements through time. Previous studies has stated that prices online were more expensive than on traditional due to the small population of online shoppers. Meanwhile, recent studies have shown results that is the opposite of the mentioned above. Online stores have products with a much lower price than traditional retailers, resulting to the boost in their revenue. It also encourages fast transaction which lessens money, time and distance.

Barriers or Constraints to the development of Micro, Small and Medium Enterprises (MSMEs): Financial & non-financial barriers:
The constraints or hindrances to the growth and development of Micro, Small and Medium Enterprises are categorized into two: the non-financial barriers and the financial barriers or access to finance. The non-financial barriers such as cost of getting electricity, heavy regulation, high tax rates and corruption are the factors that discourages the formation of new MSMEs and the entry of existing MSMEs into larger markets (Senate economic planning office, 2012).

Technological adoption:
Most business have the knowledge about the benefits of technology. However, some business establishments like MSMEs appear to be applying technology to a limited extent, as they see its benefits for their personal purposes only instead of its possible contribution to their business operations. Due the MSME's low of awareness and engagement of technology, they tend to be doubtful about the return on investment in technology adoption (Singh, 2014).

Theoretical Framework:
The theory of entitativity was created by Donald T. Campbell in 1958 in his paper titled "Common fate, similarity, and other indices of the status of aggregates of persons as social entities" to describe the nature of groups. Campbell defines entitativity as the degree to which a collection of individual entities perceived as belonging to a group. He further gave explanation on why groups are a separate pure body than its individuals. Entitativity has been used on different fields other than social psychology. It was also adapted on business-related research like how Yang Shuiqing, Lu Yaobin, Ling Zhao and Sumeet Gupta created their research titled "Empirical investigation of customer's channel extension behavior: Perceptions shift toward the online channel." This study focuses on determining the factors which affect the customers' behavior in shifting from an offline to an online 482 channel. It also suggests hypotheses that include perceived service quality, perceived entitativity and self-efficacy for change of customers.
Yang et. al's use of theory of entitativity focuses on the shift of perception from offline to the online channel. Perceived offline service quality influences perceived online service quality both directly as well as indirectly through perceived entitativity. Perceived online service quality, in turn influences customers' behavior towards the online channel extension. The results also demonstrate that self-efficacy for change directly influences behavior towards the online channel extension, and it also has an important moderating influence on relationship between perceived offline service quality and perceived online service quality. Customer channel extension behavior as well offer practical insights to organization for managing such channel extension process.
Perceived entitativity, perceived service quality, and self-efficacy for change might offer an explanation why consumers of one channel extend their consumption to another channel.
In the information, system literature, the concept of entitativity has been applied to study the transfer of trust and usage among different entities. High perceived entitativity between an unknown target and a trusted target will lead to strong initial trusting belief about the unknown target.
According to the theory of entitativity, the perceptions of the entitativity would strongly affect the information impression formation and processing (Crawford et. Al). If the perceived entitativity is high, the group will be perceived as a coherent unit, and the new extension target will be more easily reconciled with the original target in people's memory. If the perceived entitativity is low, customers may question behind the firm's extending to the new target (e.g., Peijian et. al., 2009) This study will incorporate the research model of the work mentioned above presented by Yang et. al. Unlike the original framework, researchers use the model in emphasizing the business' perceived service quality, perceived entitativity and self-efficacy for change.
In this theory, a business with the feature of entitativity, or the degree to which a collection of individual entities perceived as a belonging to a group and self-efficacy for change, have an effect to customers in which they choose a business' product/s. Customers considers the way the product is made and why the product is made, this is why there is a theory of entitativity wherein customers choice/s are shifted to online shopping from virtual stores because customers are meticulous for not only the popularity of the product or the label but also the product itself, the quality and the fast service. This is where self-efficacy for change will be visible, self-efficacy for change is the ability to finish a task or work as much as possible. With the help of theory of entitativity and self-efficacy for change, the online shops are rising with these features because of the customers' perceived perception of high-quality products and fast services. That is why businesses in the first place are building businesses considering the fast pace of customers' perception. 483

Statement of the Problem
This study aims to identify the willingness of Micro, Small, and Medium Enterprise with regards to the business sales channel extension, which leads them to establish their online store aside from their existing physical business entity. It also aims to identify the factors that MSME owners take into consideration in handling their business, through answering the following guide questions: 1. What are the factors that MSME owners take into consideration in the creation and delivery of their products/services to customers? 2. What is the perceived entitativity of MSME owners based on the: Factors that lead MSME owners to extend their physical store to an online business Factors that prevent MSME owners in considering business channel extension 3. What is the perceived quality of business owners that may affect their decision to extend their physical stores to an online business? 4. What is the rate of confidence (self-efficacy for change) of MSME owners on thefollowing: Their ability to advance in an online channel Their belief on online channel's advantages

Scope and Limitations:
This study is conducted primarily for the purpose of determining the perception of Micro, Small, and Medium Enterprises (MSMEs) on business channel extension. Through this paper, we will identify the impact of perceived service quality, perceived entitativity and self-efficacy for change of the MSMEs on extending from offline to online channel. The main source of data was gathered through the 39 business owners within the vicinity of Robinsons, Novaliches, Quezon City by using the Guided-Response and Rating Scale questionnaire. This population size of participants focused only with those under clothing businesses. Participants have limited responses through the use of scales and did not have brief explanations for their answer.

Methodology:-
Aside from using a primary source of data which is conducting a survey, this study also uses some secondary sources of data such as internet and books. The researchers gathered information through legitimate online journal websites and a few available books on the library which is related to the topic of this research. These data comes from both local and foreign sources. The researchers used Guided-Response type and Rating Scale type questionnaire as a measurement device. The researcher used these questionnaires to determine the impact of perceived service quality, perceived entitativity and self-efficacy for change of the MSMEs on shifting from an offline to an online channel extension.
This technique was used to help the respondents for measuring their answers to the questions in the questionnaire by rating it from the range of numbers given.

4-Point Modified Scale:
Rating Above moderately can do/ Above moderately believe 9 9.0-9.9 Above moderately can do/ Above moderately believe 10 10 Highly certainly can do/Highly certainly believe

Research Design:
This study is a quantitative research about the impact of perceived service quality, perceived entitativity and selfefficacy for change of the MSMEs in shifting from offline to online channel extension. The researcher utilize descriptive research design since its main purpose is to find the impact of the three factors mentioned above in the business' channel extension behavior and to describe the current status of MSMEs which entities are solely offline and solely online.

Data Gathering Procedure:
The researcher conducted a questionnaire method using non-probability sampling which are purposive and quota sampling techniques, wherein the selected respondents are those who can only satisfy the given qualifications and specified number of respondents of certain types is included in answering all the questions that were specifically created for clothing business owners. The researchers interviewed 39 business owners within the vicinity of Robinsons, Novaliches, Quezon City by means of conducting a Guided-Response and Rating Scale type of questionnaire which is based on the purpose and statement of the problem of this research. The questions that the researcher provided are inclined with perceived service quality, perceived entitativity and self-efficacy for change intended for business owners.

Sample Size:
The researchers conducted a survey to MSME owners that focuses on clothing business at Robinsons Place Novaliches which has a total population of 44. This said population came up with 39 sample size respondents using the sample size formula of sample size calculator. Data analysis Data gathered from MSME owners were analyzed. The following tables are the result from the survey conducted at Robinsons Place Novaliches.        Factors in consideration on the creation and delivery of products to customers such as affordable price, quality product, branding, accessibility and service quality are very important to the MSMEs owners as what the respondents perceived it to be. Papanastassiu and Rougani stated that, offering lower price, better service, good quality were analyzed in consumer behavior.
Thus, Khasawneh said that people prefer the branded products because they consider that branded items have more quality than non-branded products. Additionally, Zeithaml expresses price-quality relationship association of factors affecting purchase decisions of consumers.
Part III: C1. The 69.2% which is 27 out of the 39 respondents strongly agreed that one of the factors of business sales channel extension is boosting the popularity of the business and its products. According to Nair, the number of e-commerce sites and e-commerce mobile applications are growing larger and faster, making these businesses recognized by many people around the world. Thus, it reflects to the 69.2% of the total respondents who agreed that boosting the popularity of the business as well as its products is one of the factors to consider in business channel extension. These business firms believe that internet has an impact on the demand of their business in the market. 48.7% of the 39 respondents agreed that the continuous development of technology is one of the factors in consideration for business channel extension. It relates to what Nguyen stated, that E-commerce became a new field of application of internet technology. Technology is definitely widely used today and with the continuous application of this in businesses, firms explores and discovers how to use the internet effectively and also how to make their business viable and successful. Large number of the respondents agreed that better promotions and wider market are one of those significant factors in consideration for business channel extension. According to Zhu, et. al., business firms are expanding their business channels to get the most out of their ongoing multi-channel businesses and to create a sustainable buyer and seller environment in the society. The constraints or hindrances to the growth and development of Micro, Small and Medium Enterprises are categorized into two: the non-financial barriers and the financial barriers or access to finance. The non-financial barriers such as cost of getting electricity, heavy regulation, high tax rates and corruption are the factors that discourages the formation of new MSMEs and the entry of existing MSMEs into larger markets (Senate economic planning office, 2012). Based from the survey that was conducted at Robinsons Place Novaliches, most of the MSME owners agrees that high expenses, lack of materials or resources and enough profit from the current channel are the reasons that discourage them from having business channel extension. Furthermore, 17 or 44% of the 39 respondents agrees that one of the factor in their absence of consideration for business channel extension is inadequate skills in adopting online channel which is caused by their lack of awareness and engagement of technology, as they are doubtful about the return on investment in technology adoption (Singh, 2014 Based on the tables, the determination of the perceived service quality of MSME owners are very important for the owners of the said shops but in some cases, some of the determinants are considered less important like the convenience in operating hours and the excellence in delivery service. More than half of the respondents said that the quality of their store equipment is very important. It is said that this kind of technology or equipment helps the businesses to perform better (Tang et. al., 2007) Businesses nowadays become competitive, flexible and adaptive (Chan and Chan, 2010) because of the fast pace of consumers change of mind that is according to the product they need or want (Maruffuzzaman and Ashan, 2009) and the appearance of the store affects the decision making of the customer, so 77% of 39 business owners agreed that the appearance of the store should be appealing as it is labeled as very important. Employees' appearance can also affect the consumers to buy the product they offer. 24 out of 39 owners consider that the employees' appearance should be presentable. Customers are affected in the way the service provider physical attractiveness such as friendliness, credibility and competence. And can be enhanced by employing appropriate dress code that represents the business (Kusluvan) Whether companies are looking to increase their profits motivate staff, encourage customers to visit a store/website or to introduce a new product to the market, promotional products are the answer. (Anderson, Malinova 2012) Based on this information, this is highly recommended for the owners to improve their promotional material, which is also said by them that the appearance of the promotional material is very important (66.7%).  Respondents also has an above moderate belief that online businesses have a competitive advantage and offers a variety of products. This result did not contradict both Lim and Dubinsky (2004), and Prasad and Aryasri (2009)'s statement that online store provides more variety of products and services that customers can choose from.
Business owners do above moderately believe that ratings and comments on online business are true. Above moderation result was also indicated in their belief that they have a chance to extend online.

Conclusion:-
The MSME owners in Robinsons Place Novaliches have the willingness to extend their business from their existing physical stores to an online channel. Moreover, the perceived entitativity as a group of all MSMEs who sell clothes in Robinsons Place Novaliches states that having an online channel is not significant, since all of them sees that the perceived offline service quality is very important.
On the other hand, the perceived entitativity of MSME owners as an individual implies that they have the ability to extend their business online because their self-efficacy for change is above moderate, but not highly certain. Thus, the remaining percentage means that they still have doubt with regards on engaging to online business, due to the factors which constraints them from doing so, such as high expenses, lack of materials/resources, enough profit from current sales channel and inadequate skills to adapt online channel.

Recommendation:-
Based on the findings and conclusions of this study, the following recommendations are offered.
The variant of sales channel should be widely discussed directly to business owners to provide options that best fits for the distribution of the business' products.
The consideration of digitalizing the approach of delivering the products to consumer is suggested to penetrate the market.
The use of technology is highly recommended in business sales channel to sustain the competition in the market.
The recommendations to Robinson Place Novaliches are; Seminars about business sales channel extension amongst business owners selling clothes should be implemented.
Peer-to-peer session between the management and business owners, management and customers, and business owners and customers is ideal to meet the need of the sales channel extension.

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The recommendation to the future researchers; This study should prosper with your help in extending your ability to look and/or study a new approach of business sales channel based from the current demand of your time and what will be in the future.
Furthermore, this study should increase knowledge to the readers in gathering the market perception specifically in Robinson Place Novaliches about the willingness of the business owners selling clothes in extending their current business sales channel (offline to online).