ARSI UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
MBA PROGRAM
THE EFFECT OF MARKETING MIX STRATEGY ON
ORGANIZATIONAL PROFITABILITY IN THE CASE OF MSEs
IN BISHOFTU TOWN
BY
ELSA ZEREABIRUK DESALEGNE
ADVISOR
NURU MOHAMMED (PhD)
A Research Proposal Submitted to Department of Management for
Partial Fulfillment of the Requirements of Masters of Business
Administration (MBA)
June, 2022
Asella, Ethiopia
ARSI UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
MBA PROGRAM
THE EFFECT OF MARKETING MIX STRATEGY ON
ORGANIZATIONAL PROFITABILITY IN THE CASE OF MSEs
IN BISHOFTU TOWN
BY
ELSA ZEREABIRUK DESALEGNE
ADVISOR
NURU MOHAMMED (PhD)
A Research Proposal Submitted to Department of Management for
Partial Fulfillment of the Requirements of Masters of Business
Administration (MBA)
June, 2022
Asella, Ethiopia
DECLARATION
I, Elsa Zereabiruk Desalegne declare that the work included in this research proposal is my own
work carried out by me under the guidance of my advisor. The research proposal has not been
submitted for any other purpose to any other higher education institution/s.
I also declare that I have adhered to all principles of academic honesty and integrity and have not
misrepresented or fabricated or falsified any idea/data/fact/source in my research proposal
submission and the sources used are duly acknowledged. I understand that any violation of
academic integrity will be cause for disciplinary action by the University.
Name of the Student: Elsa Zereabiruk Desalegne
Signature of the student: __________________
Date: _____________________________
This is to certify that the above statement made by the MBA candidate under my advisee is
correct to the best of my knowledge as an advisor. Hence, I attest the student can submit the
research proposal to the department for further evaluation by examiner/s.
Name of Advisor: Nuru Mohammed (PhD)
Signature of the Advisor: __
Date: ___________________________
i
CERTIFICATION
This is to certify that the thesis entitled: The Effect Of Marketing Mix Strategy On Organizational
Profitability In The Case Of MSEs In Bishoftu Town submitted to Arsi University, College of
Business and Economics, Department of Management for the award of Masters of Business
Administration (MBA) is carried out by MS. Elsa Zereabiruk Desalegne under my supervision is
correct and fulfill all required standard and Commensurate with academic integrity. Hence, I
attest the student can submit the MBA Thesis to The department for further evaluation by board
of examiners.
Name of Advisor: Nuru Mohammed (PhD)
Signature of the Advisor:
Date: ___________________________
ii
APPROVAL SHEET
ARSI UNIEVRSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
MBA PROGRAM
Submitted By:
Elsa Zereabiruk Desalegne
Name of Student
_______________________ _____________
Signature
Date
APPROVED BY BOARD OF EXAMINERS
Name
Signature
Date
1) _________________________________ ______________ _________
(Chair Person)
2) ________________________________ ________________ ___________
(Internal Examiner)
3) ________________________________ _________________ ____________
(External Examiner)
iii
ACKNOWLEDGMENT
First and foremost, I would like to thank my Almighty God, who helped me in every facets of my
life.
Next, I am strongly thankful to my Advisor, Dr Nuru Mohammed, for his valuable comment and
guidance throughout the thesis.
I would also like to express my appreciation for all of the MSEs owners who have responded for
the information and for their support in providing the relevant data acquired.
Finally, special thanks to my beloved families who were around and supported me in any way
during my work.
iv
LIST ABBREVIATIONS
ANOVA
Analysis of Variance
CSA
Central Statistical Authority
GDP
Gross Domestic Product
GTP
Growth and Transformation Plan
MoFED
Ministry of Finance and Economic Development
MSEs
Micro and Small Enterprises
R&D
Research and Development
SPSS
Statistical Package for Social Sciences
4Ps
product, price, promotion, and place
v
DECLARATION.............................................................................................................................. i
CERTIFICATION ..........................................................................................................................ii
APPROVAL SHEET .....................................................................................................................iii
ACKNOWLEDGMENT ............................................................................................................... iv
LIST ABBREVIATIONS ............................................................................................................... v
LIST OF TABLES ......................................................................................................................... ix
LIST OF FIGURES ........................................................................................................................ x
ABSTRACT .................................................................................................................................... xi
CHAPTER ONE ............................................................................................................................. 1
INTRODUCTION........................................................................................................................... 1
1.1
Back ground of the study .......................................................................................... 1
1.2
Statement of the Problem .......................................................................................... 3
1.3
Research Question .................................................................................................... 4
1.4
Objectives of the Study ............................................................................................. 5
1.4.1
General objective ...................................................................................................... 5
1.4.2
Specific Objectives ................................................................................................... 5
1.5
Significance of the Study .......................................................................................... 5
1.6
Scope of the Study .................................................................................................... 6
1.7
Limitation of the Study ............................................................................................. 6
1.8
Organization of the Study ......................................................................................... 6
CHAPTER TWO ............................................................................................................................ 7
REVIEW OF RELATED LITRATURE ...................................................................................... 7
2.1
2.2
Theoretical Review ................................................................................................... 7
2.1.1
The concept of Marketing Mix strategies ................................................................. 7
2.1.2
Product Mix Strategy ................................................................................................ 9
2.1.3
Pricing objectives .................................................................................................... 11
2.1.4
Promotional Mixes .................................................................................................. 14
2.1.5
Distribution Strategies ............................................................................................ 15
2.1.6
Marketing mix strategies and profitability.............................................................. 18
Empirical Literature Review ................................................................................... 20
vi
2.3
MSEs in Ethiopian Context .................................................................................... 21
2.4
Conceptual frame work ........................................................................................... 24
CHAPTER THREE ...................................................................................................................... 25
RESEARCH DESIGN AND METHODOLOGY ...................................................................... 25
3.1
Research methodology ............................................................................................ 25
3.1.1
Description of study Area ....................................................................................... 25
3.1.2
Research Approach ................................................................................................. 26
3.1.3
Research Design ..................................................................................................... 27
3.2
Sampling Design ..................................................................................................... 27
3.2.1
Population of the Study........................................................................................... 27
3.2.2
Data Sources and Types .......................................................................................... 28
3.2.3
Data Collection Procedures .................................................................................... 29
3.3
Method of Data Analysis ........................................................................................ 29
3.4
Model specification................................................................................................. 30
3.5
Validity and Reliability ........................................................................................... 30
3.6
Ethical Consideration .............................................................................................. 31
CHAPTER FOUR ......................................................................................................................... 32
DATA ANALYSIS INTERPRTATION AND DISCUSSIONS ................................................ 32
4.1
Introduction ............................................................................................................. 32
4.2
Reliability Analysis................................................................................................. 32
4.3
Respondents‟ Profile ............................................................................................... 32
4.4
Marketing Mix Strategies ....................................................................................... 34
4.4.1
Product strategy ...................................................................................................... 35
4.4.2
Pricing strategy....................................................................................................... 36
4.4.3
Promotion strategy ................................................................................................. 37
4.4.4
Place/distribution strategy ...................................................................................... 38
4.4.5
Marketing mix strategy (4Ps) ................................................................................. 40
4.4.6
Extent of profitability .............................................................................................. 40
4.5
Relationship between Marketing mix Strategies and Profitability ......................... 41
4.6
Assumption Testing for Regression ........................................................................ 43
4.6.1
Multicollinearity Test: ............................................................................................ 43
vii
4.6.2
Linearity .................................................................................................................. 44
4.6.3
Normality of the Error Term Distribution .............................................................. 45
4.6.4
Homoscedasticity (Equal Variance) ....................................................................... 46
4.7
Comparison of Findings with Previous Studies ...................................................... 50
4.8
Discussions of the Results ...................................................................................... 51
CHAPTER FIVE .......................................................................................................................... 53
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ................... 53
Introduction ..................................................................................................................................... 53
5.1
Summary of Findings.............................................................................................. 53
5.2
Conclusions ............................................................................................................. 54
5.3
Recommendations ................................................................................................... 55
REFERENCE ................................................................................................................................ 56
APPENDIX .................................................................................................................................... 63
6.1
Appendix A: Research Questionnaire..................................................................... 63
viii
LIST OF TABLES
Table 3-1: Sampling size ................................................................................................................ 28
Table 4-1: Reliability Analysis ....................................................................................................... 32
Table 4-2: Profile of the Respondents ............................................................................................ 33
Table 4-3: Mean score and standard deviation for product strategy ............................................... 35
Table 4-4: Mean score and standard deviation of pricing strategy ................................................. 36
Table 4-5: The effect of Promotion strategies on sales................................................................... 37
Table 4-6: Mean score and standard deviation for place strategy .................................................. 39
Table 4-7: Mean and standard deviation of marketing mix ............................................................ 40
Table 4-8: Mean score and standard deviation of profitability ....................................................... 41
Table 4-9: Correlations matrix of Marketing strategies and Profitability....................................... 42
Table 4-10: Multicolliniarity Test ................................................................................................... 44
Table 4-11: Levene's Test of Equality of Error Variancesa ............................................................ 46
Table 4-12: Regression model summary of marketing mix elements (4Ps .................................... 48
Table 4-13: ANOVA of marketing mix elements on profitability ................................................. 48
Table 4-14: Regression Coefficients ............................................................................................... 49
Table 4-15: Comparison between findings in this study and previous empirical evidence............ 50
ix
LIST OF FIGURES
Figure 2-1 8p in marketing strategy .................................................................................................. 8
Figure 3-1: Map of Bishoftu ........................................................................................................... 26
Figure 4-1: scatter plot .................................................................................................................... 45
Figure 4-2: Normal p-p plot of regression standardize Residual .................................................... 46
x
ABSTRACT
The general objective of this study was to investigate the effect of marketing mix strategy on
profitability in the case of MSEs in Bishoftu town. The focus of the study was on owners of micro
and small enterprises registered and operated in Bishoftu town, and the survey was conducted
with sample population of 340 MSEs. The study was employed stratified random sampling from
different business areas (manufacturing, trade, service construction and urban agriculture) by a
structured questionnaire. The collected data were analyzed, tabulated and presented in the tables.
A Statistical Package for Social Science (SPSS) versions 22.0 software was used to analyze the
data. The data collected from the questionnaire were analyzed via descriptive statistics; mean and
standard deviation and inferential statistics; Pearson correlation and multiple regressions. The
results of this study indicate that, all the 4Ps marketing mix elements (product, price, promotion
and place) have positive relationship with organizational profitability. The finding of this study
also indicates that place product and price have positive relation and significant effect on
profitability. Place has the strong indicator of profitability followed by price and product. On the
contrary promotion has positive but insignificant effect on profitability. Furthermore, the 4Ps
marketing mix elements (product, price, promotion and place) significantly explain 74.7% of the
variations in MSEs profitability. The outcome of study enhances the implementation of proper
marketing mix strategy in the increase of profitability and to cope up the competitive business.
Keywords: Product, Price, Place, Promotion, profitability
xi
CHAPTER ONE
INTRODUCTION
1.1 Back ground of the study
The world of marketing is developing very dynamically in the current era, coupled with the
development of consumers from time to time, producers must be more adaptable in research and
development by improving the products and marketing strategies used can be implemented
accurately and in accordance with the current market. By attracting the attention of consumers,
more ideas can be developed for strategies to attract consumers to buy a product (Yoon et al.,
2014).
Marketing has often seen as the process by which a company creates value for customers and
establishes a strong relationship with customers to obtain customer value in return (Cavusgil and
Zou, 2014). The Company identifies the total market, divides it into smaller segments, selects the
most promising parts,and focuses on serving them. It is generally accepted that acquiring a new
customer may turn out to be considerably more expensive than building customer loyalty among t
he firm‟s current customers. This powerfully speaks for the need for higher levels of customer ori
entation among companies. Therefore, for maintaining and growing the target market of customer
s, a company should provide superior customer value as target customers are the cause of
marketing strategy (Kotler, 2003).
Marketing strategy is a process that can allow an organization to concentrate its limited resources
on the greatest opportunities to increase sales. A company designs its marketing mix using
mechanisms under its control: product, price, place, and promotion. The company engages in
marketing analysis, planning, implementation, and control to find the best marketing mix and to
take action. By considering the competitive advantage, the company should design a suitable
marketing strategy to fulfill the targeted customer‟s wants and needs (Mohamed et al., 2014).
1
According to Owomoyela, et al (2013), marketing strategy is a strategy that organizations use to
provide their target customer with quality products, at affordable price, offer effective
promotional strategy and interact with their distribution outlets hence creating demand for their
products and increasing performance. Marketing mix is a business tool that is used by
organizations to achieve a competitive advantage. Marketing mix refers to 4P‟s that organizations
use in their marketing process to achieve organizational goals and meet customers‟ needs and
wants. It is a set of tactical marketing tools that includes product, price, place and promotion that
marketing managers are able to control to achieve the required objective (Shankar and Chin,
2011).
The MSEs sector occupies a key and strategic role in most economies around the world. It is
unanimously agreed that the MSEs sector has played a big role in accelerating economic growth
and achieving rapid industrialization in most developing countries (Makate, 2014). In today‟s
business activities, the success or failure of any business organization depends largely on how
best such organization can satisfy its customers and this act places enormous task and
responsibility by way of marketing on any organization intending to excel at satisfying their
customers and clients. The task involve identifying accurately the needs of their customers/clients
and deciding on how best to handle their products so as to satisfy the earnings of both prospective
buyers and sellers (Awan and Hashmi, 2014).
Different empirical evidence shows on the impact of marketing strategies and company
performance in developed markets, much attention has not been given and there is little empirical
evidence in developing economy such as Ethiopia to examine marketing strategy and its impact
on company‟s profitability especially in micro and small enterprises (MSEs) (Nigist, 2017).
Today, the Micro and Small Enterprises (MSEs), portraying a prominent role on either side of a
country‟s development like creating employment and accelerating economic growth. Ethiopia has
thousands of Micro and Small Enterprises (MSEs) but only a few of these businesses are currently
accessing the international market. the Micro and Small Enterprises (MSEs) Development
Strategy of Ethiopia has been designed to maintain the momentum of the rapid economic growth
2
being registered in all sectors, foster entrepreneurship, alleviate poverty and develop MSEs,
which lay fundamental foundation for industrialized (Ebitu, 2016).
The effective marketing strategies implemented organizations could increase their profitability,
market share and achieve a competitive advantage, (Ghouri, et al., 2011). The competition is
intense within MSEs and product performance has not been so effective comparatively (Otieno,
2015). There was a positive effect on consumer purchase decision hence increase profitability
(Mowen and Minor. 2004).
1.2 Statement of the Problem
The MSEs usually engaged in production of goods and services for commercial purpose i.e., for
making profit. Hence, major activities of these enterprises are tied with marketing. A study by
Clough (2011), confirm this by stating marketing of a product or service is a central activity for a
successful business. This shows that enterprises must give attention to marketing operations and
try to identify, anticipate and meet the needs of customers so as to make sufficient profit and
attain sustainability. The MSE marketing strategies directly affect consumers and sales results,
there was a significant impact and relationship between the product quality and marketing
strategy on the profitability and increased market share of MSEs (Ebitu, 2016).
Despite the apparent significance associated with micro and small enterprises and the numerous
policy initiatives introduced by respective governments in the developing economies during the
past decade to accelerate the growth and survival of MSEs the performance of MSEs has been
disappointing (Woldie et al., 2008). Compared to large enterprises, micro and small enterprises
face many unique challenges, including limited resources and lack of experience in conducting
market research lack of marketing skills and the tendency of limiting their marketing to selling
within their own industry (Tang et al., 2005). The marketing function in MSEs is also hindered by
constraints such as poor cash flow, lack of marketing expertise, business size, tactical customer
related problems, and strategic customer-related problems In addition, and marketing theory
development in MSEs has been somewhat limited and often relies on the application of classical
marketing models to smaller businesses (Yan and Chew. 2011).
3
Statistics indicate that the high failure rates of small firms are largely attributed to weaknesses in
financial management and marketing. The alarming rate of small business failure is a major
concern hence the need to investigate their marketing strategies and determine if they influence
their profitability. From the Ethiopian context, Mesfin (2015) conducted a study at Tigray Region;
it revealed that financial constraint and skill gap of marketing strategies are found out as a general
challenge to entrepreneurs of the MSEs in addition to training, access to finance, market
opportunities, policy and legal measures and lack of innovation. Each factor affects MSEs at
different levels.
Taking these thoughts into consideration since, marketing strategies is one of the major factors for
failures of small firms, assessing the extent to what level marketing mix strategy (Product, Price,
Promotion and Place) affect the profitability of MSEs in Bishoftu town will be important to
identify the necessary marketing strategies and will be helpful to enhance their performance. As
reported by Ethiopian Cities association (2016), Bishoftu is one of the prominent towns of
Oromia located on Addis Ababa Adama road. Due to its close vicinity to Addis and the city being
situated amongst other popular recreational weekend retreats, it is well accessible and frequently
travelled through. Bishoftu is concentrated by various small and large business enterprises
operating their marketing activities these enterprises have been facing various challenges related
to marketing which can hamper their contribution to economic and social development of the
town. Thus this thesis was tried to review some theoretical and empirical studies to assess the
effect of each marketing mix strategy on profitability of MSEs of Bisoftu town
1.3 Research Question
Based on the problem statement stated above the study will seek to answer the following specific
research questions:

To what extent product strategies influence the profitability of MSEs in the case of Bisoftu
town?

To what extent price strategy influences the profitability of MSEs in the case of the
Bisoftu town?
4

To what extent promotion strategy influences the profitability of MSE in the case of
Bisoftu town?

To what extent the place/distribution strategy influences the profitability of MSE in the
case of Bisoftu town?
1.4 Objectives of the Study
1.4.1
General objective
The general objective of this study was to assess the effect of marketing strategy on profitability
in the case of MSEs of Bisoftu town.
1.4.2
Specific Objectives
Considering the general objective, the study will address the following specific objectives:
To find out the effect of product considerations strategies on profitability of MSEs of
Bisoftu town.

To determine the extent to which pricing strategy affects profitability MSEs of Bisoftu town.

To establish the effect of promotion on profitability of MSEs of Bisoftu town.

To examine the effect of place/distribution strategy on profitability MSEs of Bisoftu town.
1.5 Significance of the Study
The research findings and recommendations provided important inferences and information
which the MSE can use to improve profitability. Furthermore, insights gained in this study likely
contribute towards the development of policies by the government, MSE development offices and
other concerned organizations dealing with MSEs in Bisoftu as well as country level. The study
can also contributes to transformation of micro and small enterprises to their respective growth
levels and results generated in this study highlights the competitive strategies the MSEs to survive
in turbulent business environment influenced by bigger organizations. This study serve as an
input for researchers and other interested people in related topic and to acquire broader knowledge
about the subject matter under the study.
5
1.6 Scope of the Study
The study was limited to Oromia regional state, Bishoftu town as research setting. Thematically,
the survey was appears to concentrate only on those MSEs that are recently active and licensed at
each Selected MSEs sectors in Bisoftu. The study was limited to the impacts of marketing mix
strategies especially the 4Ps on the profitability in case of in the case of MSEs of Bisoftu town
1.7 Limitation of the Study
Among the major limitation the study was conducted on the organization sides which uncover the
other stakeholders such as customers, government (government regulation on industries) and this
factor limited the outcome of the research. The research doesn‟t include the extended three service
marketing mix elements such as people, process and physical evidence so that the research may not
provide full insight about the extended marketing mix strategy so future research should be conducted
with inclusion of the extended marketing mix elements. The study only focuses on the 4Ps of
marketing mix elements.
1.8 Organization of the Study
The thesis is divided into five chapters; The first chapter includes the background of the research,
the statement of the problem, the research question, the objective of the research, the importance
of the research, the scope of the research, the definition of the research and the operational
definition of the terminology , the schedule and the budget. The second chapter is the review of
the related literature, including the theoretical review, the empirical review, and the conceptual
framework. The third chapter include the description of the research field, research methods,
research design, population and samples, data sources and types, data collection procedures,
ethical considerations, and analysis methodology of data. Chapter for explains, discusses, and
presents the analyzed data. Finally, in Chapter five, conclusions and recommendations based on
the results of the survey was issue.
6
CHAPTER TWO
REVIEW OF RELATED LITRATURE
2.1 Theoretical Review
2.1.1 The concept of Marketing Mix strategies
Marketing is defined as a social and managerial process by which, individuals and groups obtain
what they need and want through creating and exchanging products and value with others (Shaw,
2012).The marketing function not only deals with the production and distribution of products and
services, but it also is concerned with the ethical and social responsibility functions found in the
domestic and global environment (Kotler, 2011).
McCarthy (2011) defines strategy as a direction and scope for an organization in meeting long
term objectives by configuring its resources in the present dynamic business environment.
According to Nagle & Holden (2012) strategy is an underlying concept in strategic management.
However, the marketing mixes are a set of controllable or the tactical tools in marketing which are
used by an organization so as to meet the needs and demands in the target market. Marketing
strategy refers to an organizations integrated pattern of decisions that specify its crucial choices
concerning products, markets, marketing activities and marketing resources in the creation,
communication, and or delivery of products that offer value to customers in exchanges with the
organization and thereby enables the organization to achieve specific objectives (Varadarajan,
2009).
According to Philip Kotler, marketing strategy is the marketing logic by which the company
hopes to create customer value and achieve profitable relationships. The company decides which
customer it will serve through segmentation and targeting. And then decides how, by
differentiation and positioning. Therefore, the marketing mix strategies include all the responses
of a firm in ensuring that the target market positively influences their product demand.
7
Although the idea of marketers as 'mixers of ingredients' caught on, marketers could not reach any
real consensus about what elements should be included in the mix until the 1960s (Waterschoo
and Van den Bulte, 1992).The 4 P‟s, in its modern form, was first proposed in 1960 by E. Jerome
McCarthy; who presented them within a managerial approach that covered analysis, consumer
behavior, market research, market segmentation, and planning. Phillip Kotler, popularized this
approach and helped spread the 4 Ps model (Kotler, 2000; Keelson, 2012). McCarthy's 4 Ps have
been widely adopted by both marketing academics and practitioners (Constantinides, 2006).
The prospect of extending the marketing mix first took hold at the inaugural AMA Conference
dedicated to Services Marketing in the early 1980s, and built on earlier theoretical works pointing
to many important limitations of the 4 Ps model (Fisk et al, 1993). Taken collectively, the papers
presented at that conference indicate that service marketers were thinking about a revision to the
general marketing mix based on an understanding that services were fundamentally different to
products, and therefore required different tools and strategies. In 1981, Booms and Bitner
proposed a model of 7 Ps, comprising the original 4 Ps extended by process, people and physical
evidence, as being more applicable for services marketing (Booms an Bitner, 1981). Since then
there have been a number of different proposals for a service marketing mix (with various
numbers of Ps), most notably the 8 Ps, comprising the 7 Ps above extended by 'performance.
Figure 2-1 : 8p in marketing strategy
Source (kotler, 2013).
8
2.1.2 Product Mix Strategy
Marketers broadly define a product as a bundle of physical, service, and symbolic attributes
designed to satisfy consumer wants. It is a total product concept that includes decisions about
Package design, brand name, trademarks, warranties, guarantees, product image, and new product
development. Product strategy specifies market needs that may be served by different Product
offerings. It is a company‟s product strategies duly related to market strategies, which eventually
came to dominate, overall strategy and the spirit of the company. Product strategies deal with
such matters as number and diversity of products, product innovations, product scope, and
product design (Keelson, 2012
A product mix is the assortment of goods and/or services a firm offers consumers and industrial
users. The product mix is a combination of product lines and individual offerings that make up the
product line. Product mixes and product lines undergo constant change. To remain competitive,
marketers look for gaps in their assortment and fill them with new products or modified versions
of existing ones. Marketers must continually assess their product mix to ensure company growth,
to satisfy changing consumer needs and wants, and to adjust to competitors' offerings (Velnampy
and Sivesan, 2012).
Product Life Cycle Stage and Marketing Strategies:
Introduction Stage
In the early stages of the product life cycle, the firm attempts to promote demand for its new
market offering. Because neither consumers nor distributors may be aware of the product,
marketers must use promotional programs to inform the market of the item's availability and
explain its features, uses, and benefits. New-product development and introductory promotional
campaigns are expensive and commonly lead to losses in the first stage of the product life cycle.
Firms focus their selling on those buyers who are the readiest to buy, usually higher-income
groups. Prices tend to be high because costs are high due to relatively low output rates,
technological problems in production, and high-required margins to support the heavy
9
promotional expenditures. In this stage slow sales growth is observed as the product is introduced
in the market (Kotler,et al., 2009) .
Growth Stage
Sales climb quickly during the product's growth stage as new customers join the early users who
are now repurchasing the item. Person-to-person referrals and continued advertising by the firm
induce others to make trial purchases. The company also begins to earn profits on the new
product. But this encourages competitors to enter the field with similar offerings. Price
competition appears in the growth stage, and total industry profits peak in the later part of this
stage. To gain a larger share of a growing market, firms may develop different versions of a
product to target specific segments (Kotler.et al., 2009).
Maturity Stage
Industry sales at first increase in the maturity stage, but reach a saturation level at which further
expansion is difficult. Competition also intensifies, increasing the availability of the product. Firm
concentrate on capturing competitors' customers, often dropping prices to further their appeal.
Sales volume fades late in the maturity stage, and some of the weaker competitors leave the
market. Firms spend heavily on promoting mature products to protect their market share and to
distinguish their products from those of competitors, profit stabilize or decline because of
increased competition (Kotler.et al., 2009).
Decline Stage
Sales continue to fall in the decline stage of the product life cycle. Profits also decline and may
become losses as further price cutting occurs in the reduced market for the item (Kotler.et al.,
2009).The decline stage is usually caused by a product innovation or a shift in consumer
preferences. The decline stage of an old product can also be the growth stage for a new product
(Tantong, et al., 2010).
Extending the Product Life Cycle
Sometimes it is possible to extend a product's life cycle considerably beyond what it would
otherwise be. Some useful strategies include the following: Increase the frequency of use.
10
Persuading consumers that they need to have additional smoke alarms and flashlights may result
in increased purchases by each household; add new users; introducing the product abroad might
accomplish this; find new uses for the product, change package sizes, labels and product quality.
The marketer's objective is to extend the product life cycle as long as the item is profitable. Some
products can be highly profitable during the later stages of their lifecycle, since all of the initial
development costs have already been recovered (Waheed et al., 2017).
2.1.3 Pricing objectives
Marketing attempts to accomplish certain objectives through its pricing decisions. Research has
shown that multiple pricing objectives are common among many firms. As a result, pricing is an
art as much as it is a science: It depends as much on good judgment as on precise calculation.
Pricing objectives vary from firm to firm. Some companies try to maximize their profits by
pricing their offerings very high. Others use low prices to attract new business. The three basic
categories of pricing objectives are (1) profitability objectives, (2) volume objectives, and (3)
other objectives, including social and ethical considerations, statuesque objectives, and image
goals (Nagle and Holden, 1995).
Factors to be Considered When Setting Prices
Economists might argue that pricing is regulated by the widely accepted principle of the elasticity
of demand; however, pricing decisions are based on far more factors than fluctuations in demand
relative to the available supply of a product or service. Price is the exchange value of a good or
service. An item is worth only what someone else is willing to pay for it. A company‟s pricing
decision are affected both by internal and external company factors. Internal factors affecting
pricing includes company‟s marketing objectives, marketing mix strategy, cost and organization.
External factors affecting pricing includes nature of the market and demand, competition and
other environmental factors (economy, resellers, government) (Collins et al., 2006). Three
common approaches to pricing are defined as follows.
11
Cost based pricing
A financially driven approach to pricing in which products are priced to yield an equitable profit
above and beyond all costs associated with the production of the product. Cost based pricing
ensures that products are priced so that an equitable contribution margin is attained above and
beyond the costs associated with the production of the product; however, it is difficult to
appropriately determine the unit cost associated with the product since unit costs fluctuate with
sales volume (Nagle and Holden, 1995). This usually leads to over-pricing in weak markets and
under-pricing when demand is strong, which is not prudent strategy.
Customer driven pricing
Market driven approach to pricing in which prices are determined by the amount that customers
are willing to pay for the product is customer driven pricing. Customer-driven pricing is typically
driven by the sales organization and provides flexibility in pricing so that prices can be aligned
with the amount that a customer is willing to pay. This strategy has two primary shortcomings,
however. First, customers are not motivated to be can did relative to the price that they are willing
to pay for a product. In addition, a sales organization‟s role should not be to simply take orders at
whatever price the customer is willing to pay. The responsibility of an effective sales organization
is to raise customer‟s willingness to pay a price that better reflects the products true value (Nagle
and Holden, 1995).
Competition driven pricing
Competition driven pricing is utilized to ensure that a firm achieves its desired market share
objective. This approach can often lead to inappropriate price cutting as a firm seeks to gain
market share. Although price cuts may assist a firm in achieving a short term sales volume goals
this strategy can be quickly matched by competitors, which initiates a downward spiral of prices.
The role of the sales and marketing organization is then to raise the customer‟s willingness to pay
a price that reflects the product‟s true value as opposed to merely processing orders at whatever
price the consumer is willing to pay (Nagle and Holden, 1995).
12
New Product Pricing Strategy
Pricing can be based on either of two strategies: the skimming price policy or the penetration
Price strategy.

Skimming pricing:-involves setting the price of the product relatively high compared to
similar goods and then gradually lowering it. A skimming strategy allows the firm to
recover its cost rapidly by maximizing the revenue it receives. But the disadvantage is that
early profits tend to attract competition, thus putting eventual pressure on prices.

Penetration pricing:-involves pricing the product relatively low compared to similar goods
in the hope that it will secure wide market acceptance that will allow the company to raise
its price. Penetration pricing discourages competition because of its low profits. It is often
used when the firm expects competition with similar products within a short time and
when large-scale production and marketing will produce substantial reductions in overall
costs.
Relationship between Price and Sales performance
According to Kotler (2004), companies use pricing strategies such as; premium pricing, value
pricing, penetration pricing, cost plus pricing, competitive pricing, price skimming, going rate
pricing, geographical pricing, segmented pricing, product mix pricing, psychological pricing and
discriminatory pricing. Odhiambo (2013) researched on effect of pricing as a competitive strategy
on sales performance of selected pharmaceutical companies. It was established that pricing
strategy and decision has a significant effect on sales performance. Louter, Ouwerkerk, and
Bakker (1991) in his research it was revealed that there was a positive relationship between
pricing strategy and firm performance.
Pricing Adjustment Strategies
Companies usually adjust their basic prices to account for varies customers‟ differences and
changing situations. Some of the pricing adjustment strategies are; discount and allowance
pricing, segmented pricing, psychological pricing, promotional pricing, value pricing,
geographical pricing and international pricing (Kotler., 2007).
13
2.1.4 Promotional Mixes
Each promotional tool has its own unique characteristics and costs. These strategies may be
designed around advertising, personal selling, sales promotion and publicity.
Advertising strategy
Brassington and Pettitt (2000) define Advertising as any paid form of non-personal
communication directed towards target audience and transmitted through varies mass media to
promote product, services or idea. Certain forms of advertising (TV advertising) typically require
a large budget, whereas other forms (newspaper advertising) can be done on a small budget. In
developing an advertising program, successful firms start by identifying the target market and
buyer motives. Then they can make five critical decisions, known as the five Ms: Mission: What
are the advertising objectives? Money: How much can be spent? Message: What message should
be sent? Media: What media should be used? Measurement: How should the results is evaluated?
Sales Promotion Strategy
Sales promotion is the economical and informational incentives, which are offered by firms to
buyers or distributors. It emerged as a reaction by manufacturer‟s marketers, and marketing
strategies alike to find a short term solution to the problems of excess stock of goods which are
available in variables manufacturer‟s warehouses but are not demanded by consumers and
organization (Aham, 2008). Sales promotion offer three distinctive benefits: (1) communication
(they gain attention and usually provide information that may lead the consumer to the product);
(2) incentive (they incorporate some concession or inducement that gives value to the consumer);
and (3) invitation (they include a distinct invitation to engage in the transaction now) (Aham,
2008).
Public Relations Strategy
According to Brassington and Pettitt (2000) the essence of public relation is to look after the
nature and quality of relationship between the organization and its different publics and to create a
mutual understanding. Public relation covers a range of activities ,for example the creation and
maintenance of corporate identity and image; charitable involvement ,such as sponsorship, and
14
community initiatives, media relation for the spreading of goods news as well as for crisis
management such as damage limitation. The wise company takes concrete steps to manage
successful relations with its key publics. The appeal of public relations and publicity is based on
three distinctive qualities: (1) high credibility (news stories and features are more authentic and
credible than advertisement);(2) ability to catch buyers off guard (reach prospects who prefer to
avoid salespeople and advertisements); and (3) dramatization (the potential for dramatizing a
company or product).
Personal selling strategy
Brassington&Pettitt (2000) define personal selling to be a two-way communication tool between
a representative of an organization or individuals or group, with the intention to inform, persuade
or remind them, or sometimes serve them to take appropriate action. Personal selling is a key
element in promotion, one of the four Ps in the marketing mixes. Personal selling has three
distinctive qualities: (1) Personal confrontation (it involves an immediate and interactive
relationship between two or more persons); (2) cultivation (it permits all kinds of relationships to
spring up, ranging from a matter-of-fact selling relationship to a deep personal friendship); and
(3) response (it makes the buyer feel under some obligation for having listened to the sales talk).
Sales people perform one or more of the following tasks: Prospecting, targeting, communicating,
and selling approaching, Servicing, Information gathering, and Allocating.
2.1.5 Distribution Strategies
Distribution strategy is the method a firm uses to get products and services to different channels
and networks with objective to reach the end customer, either directly or indirectly. The
intermediaries include the agents, wholesalers, distributors and also retailers. These elements help
in ensuring that a firm has provided the customers with quality customer service that has an
influence on the level of customer satisfaction (Palmer, 2011).
Customer requires convenience for the product offering such as the physical access. Distribution
channels are important in a firm‟s level of competitiveness. This is because they affect the time
when the product reaches the customer as well as final price of the product. Through distribution
15
strategy, an organization gets to understand the sales channels through enhanced knowledge,
better segmentation on the distribution within the sales channels, the roles played by the
intermediaries on the sales process, getting to understand centers of influence on the sales channel
as well as the position of a firm in relation to the sales channel (Whetton, 2011).
The two main categories of marketing intermediaries are wholesalers and retailers like canned
food products usually pass through wholesalers and retailers to reach the consumer. Wholesaling
intermediaries are people and firms that sell primarily to retailers and other wholesalers or
industrial users. The second major component of distribution strategy is physical distribution
which comprises the actual movement of goods and services from the producer to the user.
Physical distribution covers a broad range of activities. These tasks include customer service,
transportation, inventory control, materials handling, order processing, and warehousing (Kotler
and Keller, 2008).
Business marketers may choose to sell through intermediaries for a number of reasons, including
the following.

Transaction Costs - Every order incurs costs-contact costs, order-filling costs, expediting
costs and lots of paperwork. By selling larger quantities to intermediaries, the
manufacturer can reduce the proportion of transaction cost per sales dollar.

Inventory Costs - When an intermediary carries inventory, the manufacturer can reduce its
own levels of inventory. By reducing its inventory levels, the manufacturer reduces
inventory carrying costs, which include storage costs, property taxes, insurance, cost of
money invested in the inventory, and so on.

Limited Finances - Even large corporations can have a difficult time raising enough
money to operate a nationwide network of wholly owned local distribution outlets.
Despite the high cost, some industries sell direct because customers demand personalized
attention from the manufacturer, or their equipment is too sophisticated to risk less than
optimal installation by intermediaries.

Narrow Product Line- Few industrial manufacturers have a wide enough product line to
generate a high ratio of sales to direct calls by their sales force. Excessive selling costs
suggest turning the job over to intermediaries, whose broader range of products (because
16
they handle distribution functions for a large number of manufacturers) generates higher
returns per sales call.

Proximity- Intermediaries offer much more immediate and local representation. Because
they are closer to their customers, they are better able to ascertain their customers‟ needs
and wants, assess their credit rating, and offer speedy delivery, service, and individual
attention than an industrial manufacturer whose plant may be thousands of miles away.

Opportunity Costs- manufacturers often have begun operation on the basis of their
technological and production expertise rather than on their marketing and distribution
skills. Their return on manufacturing investment, then, tends to be much higher than on
investment in distribution. Thus, it makes sense to let more efficient distribution
specialists act as their intermediaries and then to invest more in the manufacturing side of
the operation. Doing so reduces the manufacturers, opportunity costs-that is, the
incremental gain foregone by not pursuing a higher-yielding alternative (Kotler and
Keller, 2008).
Selecting a Distribution Channel
The selection of a distribution channel depends on several factors: the market, the product, the
producer, and the competition. These factors are often interrelated.
A. Market Factors: - The most important consideration in choosing a distribution channel is
that market segment the producer wants to reach. If the product can be marketed to more
than one segment, multiple distribution channels may be required. In fact, multiple
channels have become increasingly popular in recent years.
B. Product Factor: - In general, products those are complex, expensive, custom made and
perishable move through shorter distribution channel.
C. Producer Factors: - Producers that offer a broad product line and have the financial and
marketing resources to distribute and promote their products are more likely to use a
shorter channel of distribution. The company has the financial resources to conduct
marketing research studies and to maintain its own network of distribution centers.
D. Competitive Factors: - In choosing a distribution channel, producers must consider how
well an intermediary performs the marketing functions. A producer may become less
17
competitive when an intermediary fails to adequately promote the firm's products (Kotler
and Armstrong., 2011)
2.1.6 Marketing mix strategies and profitability
The marketing mix is a long term plan on action which is used in order to help a firm to gain its
competitive advantage over its competitors. The competitive advantage is sustainable when
competitors cannot imitate their source of competitiveness or when no other firm conceives a
better offering (Baron, 2010).In a study by Riordan et al. (2012) asserted that performance is
viewed as a multidimensional construct and that the level of performance of a firm differs based
on a number of factors that characterize the industry.
It has been argued that the use of marketing mix strategies has been done so as to have a more
direct related marketing practice with the outcomes. Effective marketing mix strategies have
greatly contributed towards improved business performance in different aspects of a firm such as
the growth in sales volume, the level of the return on investment as well as maintenance of the
goodwill. This implies that effective marketing mix strategies strengthen the level of
competitiveness and the market share (Thabit and Raewf, 2018).
In another study by Kurtz & Boone (2011), effectiveness of marketing mix strategies affects the
level of the application of strategies that influence performance of firms. The study argued that
challenges which marketers face are in terms of their inability of showing the level of
effectiveness of their marketing mix strategies. This makes it difficult on anticipation on the
changes which take place in the marketing situation of a firm and evaluation of the whole of the
market. It is clear, that there are no agreed conclusions about the marketing mix strategies and
their relationship to the performance of firms.
Marketing efforts do not impact performance (product sales or market share) independently of
each other. Marketing mix activities need to be coordinated because they interact to determine
performance (Gatington, 1993). This will help managers to take advantage of the complimentarily
18
and to avoid incompatibility between marketing mix instruments given constraints by budget and
the variables themselves.
Evidence from literature shows that, for example advertising effectiveness is enhanced by the
quality of the product (Gatington, 1993), Prior sales person contact retail availability and higher
or lower price depending on the advertising medium (Prasad and Ring, 1976). Sales call
effectiveness increases with the use of samples and handouts in medical marketing and with
advertising, consumer price-sensitivity has been shown to be affected by advertising Sometimes
position advertising increasing price sensitivity (Eskin and Baron, 1977), negative in other
studies. This phenomenon was attributed to amount of competitive reactions to advertising in the
marketing (Gatington 1984).
The 4P‟s marketing mix have been criticized for ignoring the human factor, lack of strategic
dimension, offensive postures and lack of interactivity. The marketing mix is a long term plan on
action which is used in order to help a firm to gain its competitive advantage over its competitors.
The competitive advantage is sustainable when competitors cannot imitate their source of
competitiveness or when no other firm conceives a better offering (Baron, 2010).In a study by
Riordan et al. (2012) asserted that performance is viewed as a multidimensional construct and that
the level of performance of a firm differs based on a number of factors that characterize the
industry .It has been argued that the use of marketing mix strategies has been done so as to have a
more direct related marketing practice with the outcomes.
Effective marketing mix strategies have greatly contributed towards improved business
performance in different aspects of a firm such as the growth in sales volume, the level of the
return on investment as well as maintenance of the goodwill. This implies that effective marketing
mix strategies strengthen the level of competitiveness and the market share. In another study by
Kurtz & Boone (2011), effectiveness of marketing mix strategies affects the level of the
application of strategies that influence performance of firms. The study argued that challenges
which marketers face are in terms of their inability of showing the level of effectiveness of their
marketing mix strategies.
19
2.2 Empirical Literature Review
Adewale (2013) research on Impact of Marketing Strategy on Business Performance in Small and
Medium Enterprises (Smes) in Oluyole Local Government, Ibadan, Nigeria. The study mainly
focuses on the independent variables (i.e Product, Promotion, Place, Price, Packaging and after
sales service) and dependent variables of business performance in term of profitability, market
share, return on investment, and expansion. The researcher found out that marketing strategies
(product, place, price, packaging, and after sales service) were significantly independent and joint
predictors of business performance. The study however, discovered that promotion has no
positive significant effect on business performance.
Kiprotich (2012), did a study on effects of 4ps marketing mix on sales performance of automotive
fuels of selected service stations in Nakuru town. The research employed the research design
called questionnaire design. The oil marketers‟ performance is significantly influenced by the 4
ps. Each of the elements however carries a unique contribution to sales performance of
automotive fuels in the selected stations in Nakuru town.
Bintu (2017) researched on effect of marketing mix strategy on performance of small scale
businesses in Maiduguri Metropolitan, Boron State Nigeria. It was revealed that marketing
strategy; product, price, promotion and place have a significant influence on business
performance. Ebitu (2016) researched on marketing strategies and the performance of small and
medium enterprise in AkwaIbom State Nigeria. It was established that product quality strategy
and relationship marketing strategy has a positive and significant influence on profitability and
increase in market shares. The study recommended that SME‟s in Nigeria should invest more in
product quality rather than advertisement.
On the other hand Kisu(2015),studied Effect Of Marketing Strategies On The Performance Of
Seed Companies In Kenya. The study used a cross sectional descriptive survey design. The study
found out that the marketing strategies used by the seed companies were found to be pricing,
people, processes, and place, product and promotion strategies. Pricing strategy was used by the
20
seed companies in determining the price of seeds after taking into consideration competitors
prices and price changes and response to market changes.
The study found out that the processes strategy enabled the seed companies to differentiate
themselves through packaging in branded materials, marketing of final seeds and production of
seeds in order to be consistent in production. The product strategy was found to be efficient in
meeting customer wants, providing products with low probability of failure, developing products
that have broad market appeal, developing innovative new products and offering a broad product
line. The seed companies were found to be using promotional strategy to advertise their products
through various media, to elicit attention, interest, desire and action, and focusing on customer
needs (Kisu, 2015).
The marketing strategies used by the seed companies were found to have resulted in increased
average brand equity and market share, company net profit, increased customer satisfaction,
increased customer loyalty which is success factors on the performance of any strategic
organization. The regression analysis established that marketing strategies influence the
performance of seed companies‟. The marketing strategies were found to explain 82.5% of the
performance of seed companies. Generally, from above literature reviews, previous studies have
established relationships between marketing strategies and performance; however each of
independent variables (Marketing Strategies)affected performance at different percentage rate
(Kisu, 2015).
2.3 MSEs in Ethiopian Context
As stated by ILO, (2005) in Ethiopia until 1997, there were no organized policy and support
systems catering to the development of the MSEs sector. Challenges, Opportunities and Prospects
Premises, markets, finance, supply arrangements, regulatory barriers and legitimization of
entrepreneurial activity are among the most urgent. However, Mekonnen (2014) described that
recognizing the significance of this sector; the Ethiopian Government issued the National Micro
and Small Enterprises Strategy in 1997 and established the Federal Micro and Small Enterprises
21
development Agency in 1998. The country„s industrial policy in 2003 and the poverty reduction
strategy in 2006 have singled out MSEs as major instruments to create a productive and vibrant
private sector and reduce poverty among Rural and urban dwellers.
Believing that Micro and Small Enterprises Sectors contribute to the economy of nations by
creating employment opportunities, production of goods and services and other value added
activities, Ethiopian government established , the Manufacturing, Construction, Commercial,
service and Agricultural sectors. Empirical studies in Ethiopia indicate also that economic roles of
the Micro and small enterprises in the country show significant changes in this decade. Mulate, et
al (2006) stated that Micro and small enterprises are playing vital role as a major source of
entrepreneurial skills, innovation, employment opportunity, and generations of income for many
people. Hence, support service programs are developed to alleviate the financial problems of
MSEs through credit availability and improve market access to large business purchases which
include skill upgrading programs for MSE operators, strengthening the use of appropriate modern
technologies that boost their capacity to create long-term jobs, and export markets
There are several marketing strategies that can take any MSEs from mediocre to success when
utilized correctly. (Mohamed et al, 2014). MSEs have difficulty adapting to market change
strategies and competing with big companies because they do not have a structured marketing
plan. MSE owners do not understand market orientation and focus only on customers, Hinson &
Mahmoud (2011). The marketing strategy (product, price, promotion, and place) has a significant
influence on business performance (Bintu, 2017). There was a relationship between
organizational capability and perceived product quality, (Nirusa, 2017). The product, price,
promotion, and place had a positive association and significant influence on performance of sales
volume, (Nigist, 2017). There was a significant relationship between the marketing problems of
MSEs and impact on profit margin and sales, (Ardojouman and Asma, 2015). The marketing
strategy is the fundamental goal of increasing sales and achieving a sustainable competitive
advantage (Rotich, 2016).
The MSE marketing strategies directly affect consumers and sales results (Best, 2000). There was
a significant impact and relationship between the product quality and marketing strategy on the
22
profitability and increased market share of MSEs, (Ebitu, 2016). The customers increasingly
expect products to be of high quality. Hence, product quality often considered to contribute to the
development of a firm‟s competitive advantage, (Hitt and Hoskisson 1997). The effective
marketing strategies implemented organizations could increase their sales performance, market
share and achieve a competitive advantage, (Ghouri, et al, 2011).
The competition is intense within MSEs and product performance has not been so effective
comparatively (Otieno, 2015). There was a positive effect on consumer purchase decision hence
increase sales (Mowen and Minor 2004). The value based pricing has a positive effect on
profitability of an organization, (Deonir, et al, 2017). There was a positive relationship between
values based pricing and firm performance (Liozu, 2013). A penetration pricing is the process of
setting a price at lower price for new products or service support the organizations to look for new
market for an existing product (Vikas, 2011).
The MSEs have to adopt more modern technological tool like mobile marketing to improve on
their performance and marketing their product and services but except few most of the MSEs use
traditional forms of marketing to reach potential customers and to entrench their brands (Cooper
and kleinschmidt 2015). The product, price, place, packaging and after sales services affects the
business performance of MSEs, (Adewale, et al, 2013). Innovative methods applied can enable
MSEs to compete and survive in a competitive global environment (Kiran et al., 2012). There was
no significant impact created the marketing strategies on MSEs business growth (Gajanayake,
2010).
23
2.4 Conceptual frame work
Independent variable
Dependent variable
Marketing mix
Profitability
Product
Price
Profitability of MSEs(sales
performance and customer
Promotion
satisfaction)
Place
Source: (researchers own development 2022)
24
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 Research methodology
3.1.1
Description of study Area
The study was focused on the assessment of the impacts of marketing mix strategy on profitability
in the case of MSEs of Bisoftu town.
Bishoftu town is a separate woreda of Ethiopia located 47.9 km south east of Addis Ababa along
its four route highway. It is one of prominent cities under east shewa Zone of Oromia Regional
state. It is located between 8o 43„-8045„north and 38o056„-390 01„east longitude (Bishoftu, 2006).
The natural topography of Bishoftu town with buffer zones has been characterized by flat land on
North and east and is locked by the swamp and lakes. On the south direction undulating land that
is dominated by hills, while the general topography of the city is undulating that is dominated by
hills. The altitude of the town ranges from 1900-1995m above sea level .May is the hottest month
of the year while November is the coldest one. Its average Temperature and Rainfall is 26.08 oc
and 735mm respectively the major components of the city inhabitants are small and large scale
merchants, civil servants and daily laborers. Bishoftu is one of the highly populated cities in
Ethiopia. According to the CSA (2022), Bishoftu has 171,115 populations. The city„s population
is increasing rapidly as a result of its increased attractiveness in terms of improved road
infrastructure, water supply, health facilities, sanitation infrastructure, and greenery development.
25
Figure 0-1:
Map of Bishoftu
Source: https://www.google.com
3.1.2
Research Approach
Creswell (2009) asserted that quantitative research is a type of educational research in which the
researcher decides what to study, asks specific, narrow questions, and collects numeric
(numbered) data from participants, analyzes these numbers using statistics, and conducts the
inquiry in an unbiased, objective manner. Variables can be defined as attributes or characteristics
of individuals, groups, or subgroups of individuals. Quantitative method is a study involving
analysis of data and information that are descriptive in nature and qualified (Sekaran, 2003).
Quantitative approach is one in which the investigator primarily uses postpositive claims for
developing knowledge, i.e., cause and effect relationship between known variables of interest
(Creswell, 2009). Therefore, in terms of methods, this research was employed quantitative
method while conducting the study.
26
3.1.3
Research Design
In the view of on Wumere (2009), research design is a kind of blue print that guides the
researcher in his or her investigation and analysis. The main aim of this study was to assess the
effect of marketing mix strategy on profitability (Sales performance and customer satisfaction) in
the case MSES in Bishoftu. Both descriptive and explanatory research design were used because
descriptive research involves describing a problem, context or a situation of research variables
and explanatory design enables to explain the relationship between marketing mix strategy and
profitability.
The researcher was use the Cross-sectional field survey method to assess the relationship between
marketing mix practices and profitably of MSE in Bishoftu. In the cross-sectional field survey,
independent and dependent variables were measured at the same point in time by using a single
questionnaire. In addition the study also said to be associational in design because there was the
intent to establish the relationship between dependent and independent variables. This study
investigate the impact of marketing mix strategy on profitably based on fundamental theories,
principles and management philosophies that are supposed to be effective parameters just to
evaluate the actual impact of MSE in Bishoftu. Therefore, the researcher was preferred to use
both descriptive and explanatory research type, which helps to use quantitative data analysis
3.2 Sampling Design
3.2.1
Population of the Study
The interest of this study from whom the researcher needs to obtain information was the MSEs in
Bishoftu. According to the secondary data collected from MSEs development office of Bishoftu
Town, (2014 EC), there are 548 registered and currently operated having a total number of 2494
owners within 5 sectors. These form the population of the study. Hence, the study was concerned
about MSEs owners/managers involved in industry (manufacturing, construction, service, urban
agriculture, and trade). The sample size population was determined 340. The sample size was
27
selected here is considered as representative of all sectors and also large enough to allow for
precision and confidence of the research findings. The following formula was used for calculation
of the sample size of population since it is found to be relevant to studies where inferential
statistics was being used to analyze data (Jackson & Furnham 1999).
(
)
(
=n
)
Where
n = sample size required,
N= number of population (2494),
P=estimated variance in the population which is 50%,
A = margin of error which is 0.05,
Z = standard normal test (for confidence level 95%) is 1.96,
R = estimated response rate which is 98%.
Using the given formula, 340 respondents are selected from the total of 548 MSEs consisting
2494
Table 4-0-1: Sampling size
Sampling
population
No
1
2
3
4
5
Types of Enterprise
Total
population
Sample
population
Percentage (%)
Manufacturing
Trade
Service
Construction
Urban agriculture
Total
105
126
134
137
46
548
65
78
83
85
29
340
19.1%
22.9%
24.4%
25%
8.52%
100
3.2.2
Data Sources and Types
The researcher was use primary data for the entire of study. The information was gathered
through questionnaire which is developed by other researcher and modified to this research
context. The data collected through questionnaires was used as primary data, the source of
28
primary data was structure questionnaire while that of secondary data was journals, articles, and
websites, working manuals, MSE„s laws and regulations of the federal and regional government,
books document reports from Bishoftu trade and industry biro (number of MSEs, number of
owners, sector of business) and other research studies. This study was mainly base on primary
data which provided us with high quality, reliable and acknowledged data.
3.2.3
Data Collection Procedures
A closed ended questionnaire was used to collect primary data. According to Sansoni (2014), a
questionnaire is a data collection tool that is designed to collect structured and unique data from
respondents. In the questionnaire there are three sections. The first section describes the
background information of the respondent. The second section contains questions related to
marketing mix strategies and the last section related to the relationship between marketing mix
strategies and profitability. Questionnaire: close ended questionnaire in a 5 point likert scales was
used to collect data from the sample respondents. The questionnaire had 5 rating scales ranging
from 1- strongly disagree to 5 strongly agree. Data gathered through questionnaires was simple
and clear to analyses and it was allows for tabulation of responses and quantitatively analyzes
certain factors. Furthermore it is time efficient for both the respondents and researcher. The
questionnaire was structure in such a way that it includes all relevant parts and information to
clearly inform the respondents.
3.3 Method of Data Analysis
The data collected by closed ended questionnaires was analyzed quantitatively by using SPSS (v
22) Tables and figures were used to present findings. The collected data was analyzed and
interpret by using quantitative techniques.. To analyze the data, different kinds of statistical
methods including descriptive statistics (Mean and standard deviations) and inferential statistics
(Pearson correlation and multiple linear regressions) were used. Infеrеntiаl statistics is а technique
used by researchers to study samples and make Generalization about the population (Zulfiqar and
Bala, 2016).
29
3.4 Model specification
The analysis was carried out using the SPSS software version 22. Both descriptive and
inferential statistical methods were used in this study. Regression analysis was used to see how
much the independent variable (product, price, promotion, and place) influences the dependent
variable (MSEs profitability). In addition, correlation analysis was conducted to measure the
strength of the association between marketing mix strategy and organizational profitability.
Both the dependent and independent variable was measured using descriptive statistics. The
regression model took the following form
Where: Y= Firm profitability
X1 =Product
X2 =Price
X3 =Place
X4=Promotion
0 = Constant
1-
4
= Regression coefficients
= Regression error
3.5 Validity and Reliability
Reliability
Reliability is the degree to which measure is free from error and therefore, yields consistent
results. All the constructs was tested for the consistency reliability of the items within the
constructs by using Cronbach‟s alpha reliability analysis. The reliability of a measure indicates
the stability and consistency with which the instrument measures the concept and helps to assess
the goodness of a measure (Zikmund, 2003). According to Sekaran (2003), the closer the
reliability coefficient gets to 1.0, the better it, and those values over 0.80 are considered as good.
Those values in the 0.70 are considered as acceptable and that reliability value less than 0.60 is
30
considered being poor. This illustrates that all items and variables was reliable as their reliability
values exceed the prescribed threshold of 0.7.
Validity
Validity is the criteria for how effective the design is in employing methods of measurement that
was capture the data to address the research questions (Kazi, 2010).Kazi (2010) defined the
validity as “the degree to which a measure accurately represents what it‟s supposed.” Validity is
concerned with how well the concept determined by the measure(s).The questions had been
deriving from relevant literature to ensure the validity of the questionnaire. The questioners had
been adopting from previous research works that related to this research.
3.6 Ethical Consideration
Brief description of the central objectives or purpose of the study would clearly state in the
introductory part of the questionnaires to be filled by the respondents. All information that was
collected from the respondents was treated with confidentiality without disclosure of the
respondent‟s identity. Moreover, no information was modified or changed, hence information got
would present as collect and the entire literatures collect for the purpose of this study was
appreciated in the reference list
31
CHAPTER FOUR
DATA ANALYSIS INTERPRTATION AND DISCUSSIONS
4.1 Introduction
In this chapter data that were collected to examine the relationship between MSEs profitability
and marketing mix strategy practice that were interpreted and analyzed using SPSS (version 22).
The data was collected by using the questionnaire that were developed in five scale ranging from
five to one where 1 strongly disagree ,2 disagree ,3 neutral,4 agree and 5 strongly agree. A total of
340 questionnaires were distributed to MSESs, owners, and 325(95.6%) were obtained valid and
used for analysis. This chapter mainly contains data analysis interpretation and discussion.
4.2 Reliability Analysis
A pilot study was carried out to determine the reliability of the questionnaire. The Cronbach
Coefficient alpha was employed to establish the instrument reliability and it was used to measure
the internal consistency of independent variables. According to the table result, it revealed that all
strategy scales were above the 0.70 therefore it was considered as good reliability
Table 4-1: Reliability Analysis
Scale
Product strategy
Price strategy
Promotional strategy
Place strategy
Cronbach's Alpha
.728
.762
.706
.784
N of Items
11
10
9
8
Survey result, 2022
4.3 Respondents’ Profile
32
The demographic profile of the respondents were presented and discussed in various tables
regarding their Gender, Age, Marital status, Level of education, Age of industries and their
experiences. They are as follows
Table 4-2: Profile of the Respondents
Parameters
Gender
Age
Frequency
Percent
Female
161
49.5
Male
164
50.5
>60
10
3.1
20-30
86
26.5
31-40
134
41.2
41-50
72
22.2
50-60
3
.9
51-60
20
6.2
Below certificate
77
23.6
Degree
110
33.8
Diploma
138
42.5
Divorced
29
8.9
Married
148
45.5
Single
121
37.2
Widowed
27
8.3
>9 year
4
1.2
3-5 year
122
37.5
5-9 year
113
34.8
Less than 3 years
86
26.5
Construction
77
23.7
Manufacturing
56
17.2
Service
85
26.2
Trade
80
24.6
Education status
Marital status
Work experience
Types of business
33
Urban agriculture
27
8.3
Source: Survey result, 2022
From the above table about 50.5% respondents were male and 49.5% were females. The data
indicated that 41.2% of the respondents were between 31-40 years, 26.5% was in between 20-30
years, 22.2% was fallen between 41-50 5years, 6.2 % was between 51-60 years, 3.1 % was above
60 and the remaining 0.9% is between 50-60 years. This shows that the majority of MSEs owners
were between the ages of 20- 40 years this is a productive age group therefore, there is a potential
advantage of MSEs were formed by young owners to achieve their objectives.
Regarding the education level 42.5% respondents were diploma holders 33.8% respondents were
degree level, and 23.6% respondents were below certificate. The table shows that majority of the
respondents are educated and more than Certificate holders. This implies that it is a good
advantage for marketing mix strategy application. In addition, all respondents were expected to
understand the questionnaire and respond correctly. On the other hand from the total 45.5. %
respondents were married, 37.5% were single, 8.9% were divorced and 8.3% were widowed. This
indicates that the majorities of the MSES owners were married and matured this may have the
advantage to manage the enterprise effectively and it may help to achieve its long-term objectives.
The work experience of the respondents revealed that 37.5% respondents had work experience 3
to5 years, 34.8% respondents had 5 to 9 years, and 26.5% respondents had below three year and
1.2 % respondents had above 9 years work experience. Regarding the work experience of the
respondents in their respective business field that 26.52% respondents had experience in the
service field, 24.6% respondents had in trade, 23.7% respondents had in construction field, and
17.2% respondents had in manufacturing and 8.3% in urban agriculture.
4.4 Marketing Mix Strategies
Marketing mix strategy is a crucial determinant of successful firm performance. However, good
strategy planning alone does not guarantee success. Successful strategies also involve robust and
effective implementation, evaluation, and control mechanisms. This section discusses the
34
following regarding the influence of marketing mix strategies on profitability in the case MSEs in
Bishoftu. For all marketing mix elements (product, price, promotion and place) the mean score
and standard deviation have been computed. The table below shows the computed descriptive
statistics such as mean score and standard deviation result for both dependent and independent
variable.
The minimum and maximum responses of each of this research are range from 1 to 5 for all the
variables used in descriptive statistics. The mean value represents the average response of all
representatives on a certain dimension. Mean scores 4.51-5.00 excellent or very good, 3.51-4.50
good,2.51-3.50 average or moderate, 1.51-2.50 fair, and 1.00-1.50 is poor (Poonlar Btawee:1987)
cited in Welela (2019) while, the standard deviation shows how diverse the response of
respondents are.
4.4.1
Product strategy
In this variable about eleven constructs distributed for the respondents related with the variety of
product, quality, brand, customer complain about the product and product ability in meeting the
customer requirement. The mean score obtained from the response of the respondent presented as
follow.
Table 4-3: Mean score and standard deviation for product strategy
N
Product quality has a positive impact on
profitability
Package design increases product visibility
and recognition
Product appearance, smell, flavor affect
your sales volume
The packaging is effective.
325
3.465
Std.
Deviation
.6686
325
3.25
.774
325
3.68
.700
325
3.79
.813
Customers complain about the quality of
your products.
Product perceived quality influence
purchase intention
Branding influences firm performance
325
3.21
.550
325
3.65
.856
325
3.20
1.269
35
Mean
Firms brand image, and loyalty has an
influence on profitability of a company
Packaging is used to attract attention
325
4.26
.449
325
3.45
.779
Brand awareness influence an MSEs
performance
MSEs are efficient in meeting customer
wants
Product strategy mean overall
Valid N (listwise)
Source: Own survey, 2022
325
3.86
.768
325
3.99
.850
3.585
0.33583
325
As it can be seen from the table, the mean value of product strategy is 3.585 and S.D. (0.33583)
from the sub questions asked under product, the highest mean score, and 4.26 is obtained on
Firms brand image, and loyalty has an influence on profitability”. And the lowest mean which
shows the respondent show weak agreement that there is customer complains about the quality of
the product. (Mean=3.21). Statement 1, 2, 4, 6, and 8 showed average or moderate agreement
while statement 3,5,7,9, and 10 showed good agreement. Generally from the above table a
researcher concluded that majority of the respondents agree that the MSE provide variety of
products in meeting customer satisfaction. Quality products, meets customers requirement (mean
value 3.99).
4.4.2
Pricing strategy
Under this variable about ten constructs related to the MSEs pricing strategy aspect such as the
effect of pricing on profitability, the appropriateness of the price of the product, value based
pricing, discount terms, and the usage of pricing skill in the MSEs are addressed in the pricing
strategy questions. The individual construct and the overall pricing mean and standard deviation
is computed as follows.
Table 4-4: Mean score and standard deviation of pricing strategy
Use of pricing strategy has increased profitability
Value-based pricing has a positive impact on your
profitability
Use of penetration pricing influences customer purchase
Price penetration has a positive effect on growth and
36
N
325
325
Mean
4.098
4.480
Std. Deviation
.8550
.5361
325
325
3.778
4.099
.9845
.8450
performance of MSEs
Price promotion strategies affect sales performance
Use of price discount influences sales performance
MSEs offer products in lower prices market segment
MSEs use penetration pricing to increase product adoption
Price promotion has a significant impact on perceived
product quality
Pricing is a basis for competition among MSEs
Pricing strategy overall mean and SD
325
325
325
325
325
4.058
4.097
3.75
4.088
4.096
.6664
.72902
1.084
.824
.942
325
4.27
.443
0.2112
4.0814
Valid N (listwise)
Source: Own survey, 2022
325
The overall average Mean (4.0814) and S.D. (0.21028). From the above table statement (2) value
based pricing, showed the highest score (4.48) whereas statement (7) MSEs offer products in
lower prices market segment show the least score (3.75). Generally from the above table a
researcher concluded that majority of the respondents agree with all the constructs under pricing
strategy includes effect of pricing on profitability, the appropriateness of the price of the product,
value based pricing , the usage of pricing promotion and Pricing is a basis for competition among
MSEs i(with mean value above 4.00).
4.4.3
Promotion strategy
Under this variable about nine constructs related to the promotional tools used by the MSEs such
as the application of promotional strategy, uses of advertising, sales promotion, personal selling,
publicity, direct marketing and its effect on profitability are addressed in the questions. The mean
score and standard deviation for each constructs in the promotional strategy practice computed as
follows
Table 4-5: The effect of Promotion strategies on sales
N
Mean
Std.
Deviation
Sales promotions influences sales volume
325
4.04
.418
Use of sales promotion has increased brand loyalty
325
3.397
.9587
37
of MSEs
Advertising has increased sales of MSEs
325
3.52 0
.850
Your enterprise uses sales promotion as one of its
promotional strategies
Your enterprise uses direct marketing as one of its
promotional strategies
MSEs offer price discounts and coupons
325
3.255
.8385
325
3.45
.804
325
2.680
1.1093
MSEs uses personal selling and publicity to
325
3.065
.9357
325
1.951
.7184
325
1.99
.7262
2.6472
1.13607
promote their products
MSEs advertise their products through various
media
MSEs introduce new products in design and style
Promotion strategy Mean and SD
Valid N (listwise)
325
Source: Own survey, 2022
From the above table the overall average Mean (2.6472) and S.D. (1.13607) values representing
the disagreement of respondent‟s related to promotional strategies on profitability. The results of
each statement mean and SD values had given in the above table, from the above results, there
was a good agreement by the respondents indicated in the first three statements 1, 3 and 5,the
remaining all other statements 2, 4, 5, and 6 showed disagreement. On the other hand statement 8
and 9 stated that there was a strong disagreement with the promotion strategy.
4.4.4
Place/distribution strategy
Under this variable about eight construct related to the place strategy practice of the MSEs such
as the way of getting target customer, the effects of place on sale and profit, geographic location,
and the effectiveness of channel coverage and transportation system address in the questionnaires.
The mean and standard deviation for each constructs presented as follows
38
Table 4-6: Mean score and standard deviation for place strategy
N
Mean
Std.
Deviation
Your products get to the target customers
325
3.27
1.103
325
3.68
.904
325
4.27
.443
325
3.78
.748
325
3.73
.904
325
3.43
.687
MSEs are accessible to customers
325
3.36
0.675
MSEs was place their products or services to gain
325
3.02
1.336
3.5800
.38899
Through your distributional channels
Use of distribution channels influences sales and
profit
Geographic location has a significant influence on
your profitability
Close location of MSEs selling similar products
affects performance
Physical surrounding (finishing, good working
environment)is have any effect on your sales
Use of attractive stimuli such as music has an
influence on customers
market share
Place strategy overall mean and SD
Valid N (listwise)
325
Source: Own survey, 2022
The overall average Mean (3.58) and SD (0.38899) values representing the Good agreement of
respondents related to place strategies on profitability. Statement (3) Geographic location has a
significant influence on profitability showed the highest score4.27 were as statement (8) MSEs
was place their products or services to gain market share showed the least score (3.02).
According to the table results, statements 2, 3, 4, and 5 were showed a good agreement of
respondents and the remaining 1, 6, 7, and 8 statements showed the moderate agreement
regarding place strategy.
39
4.4.5
Marketing mix strategy (4Ps)
After the mean and standard deviation for each constructs under each independent variable were
computed the overall mean for each independent variable computed and presented as follows.
Table 4-7: Mean and standard deviation of marketing mix
PRODUCT
PRICE
PROMOTION
PLACE
N (Valid)
325
325
325
325
Mean
3.585
4.0814.
2.6472
3.5800
Sta dev
0.33583
0.21028
1.13607
.38899
Source: Own survey, 2022
Generally all the above mentioned points are summarized, price, which has the highest mean
value of 4.08, is the dominant marketing mix elements. Followed by product with mean value of
3.585, place 3.58, and promotion 2.64. It implies that the MSEs in Bishoftu should give due
consideration for improving all marketing mix strategy especially the promotion mix as the mean
value for this elements is relatively low
4.4.6
Extent of profitability
About five questions which help to gather information about the effect on profitability was
analyzed against the four marketing mix strategies of MSEs. The table below showed the Mean
and Standard deviation value about the statements regarding the effects of profitability on the
marketing mix strategies.
40
Table 4-8: Mean score and standard deviation of profitability
N
MSE product strategy has influenced
Mean
Std. Deviation
325
4.00
.000
Pricing influences profitability of MSE
325
4.27
.443
Use of promotion strategy has increased
325
3.73
.904
325
4.00
.020
325
3.78
1.103
profitability
MSE business performance
MSE place strategy has influenced quick
distribution of our products
MSE achieved Maximum profitability as
a result of the application of strategies to
the marketing mix.
Valid N (listwise)
325
Source: Own survey, 2022
From the above table, an attribute/the items from profitability “MSEs achieved maximum
profitability as a result of the application of pricing strategy” followed by “MSEs achieved
maximum profitability as a result of the application of product and distribution strategy yielded
the highest score. Generally your MSEs achieved maximum profitability as a result of the
application of strategies to the marketing mix with mean score of 3.78. And the aggregate mean
score of profitability is 3.96 which showed good agreement.
4.5 Relationship between Marketing mix Strategies and Profitability
A. Correlation Analysis
Correlation analysis was used to examine the associations between each of the 4Ps of marketing
mix and profitability. A correlation refers to a quantifiable relationship between two variables,
and the statistic that provides an index of that relationship is called a correlation coefficient r,
which is a measure of relationship between two interval or ratio variables (Akroush, 2003). The
correlation coefficient is scaled so that it is always between -1 and +1. When r is close to 0 this
41
means that there is little relationship between the variables and the farther away from 0. r is, in
either the positive or negative direction, the greater the relationship between the two variables. If
there is perfect linear relationship with positive slope between the two variables, we have a
correlation coefficient of 1; if there is positive correlation, whenever one variable has a high (low)
value, so does the other. If there is a perfect linear relationship with negative slope between the
two variables, we have a correlation coefficient of -1; A correlation coefficient of 0 means that
there is no linear relationship between the variables (Valerie and McColl, 2005).
Table 4-9: Correlations matrix of Marketing strategies and Profitability
Product
Price
Pearson Correlation
1
Sig. (2-tailed)
N
325
Price
Pearson Correlation
.148**
1
Sig. (2-tailed)
.008
N
325
325
**
Promotion
Pearson Correlation
.156
.118*
Sig. (2-tailed)
.005
.033
N
325
325
**
Place
Pearson Correlation
.349
.167**
Sig. (2-tailed)
.000
.002
N
325
325
Profitabilit
Pearson Correlation
.464**
.306**
y
Sig. (2-tailed)
.000
.000
N
325
325
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Source: Own survey, 2022
Promot
ion
Place
Profitability
Product
1
325
.107
.053
325
.133*
.017
325
1
325
.830**
.000
325
1
325
The results of the correlation analysis indicate that all of the marketing mix variables are
positively related to profitability. According to Cohen (1998), strength of correlations can be
interpreted as follows
Strength of correlation •
r = - + .10 to - + .29 small effect (weak) •
r = - + .30 to - + .49 medium effect (moderate) •
r = - + .50 to - + 1.0 large effect (strong)
42
Hence, place r= (0.830, p<0.01), has strong, positive and significant correlation with profitability,
while product r= (0.464, p<0.01) and price r= (0.306, p<0.01) have a moderate effect with
significant correlation .regarding promotion r= (0.133, p>0.01) it has weak effect and
insignificant in this study. The results indicate that the independent variables (predictor variable)
have positive correlation with the dependent variable. Accordingly, it is possible to conclude that
there is a positive, significant correlation or relationship between marketing mix (4Ps) strategy
and MSEs profitability so that any improvement in one of the dimensions will positively affect to
profitability.
4.6 Assumption Testing for Regression
Analysis Meeting the assumptions of regression analysis is necessary to confirm that the obtained
data truly represented the population and that researcher has obtained the best results (Hair et al.,
1998). Three assumptions for regression analysis used in this study were discussed for the
individual variables: multi-collinearity, linearity and normality and Homoscedasticity (Hair et al.,
1998). In the following paragraphs, each assumption is explained.
4.6.1
Multicollinearity Test:
Multiple regressions, is used to analyze relationships between more than two variables, and
nonlinear regression, which is used to analyze relationships that do not have a straight-line
pattern. In multiple regression analysis, multicollinearity refers to a situation where a number of
independent variables are closely correlated to one another. Multicollinearity test is done using
variance inflation factor (VIF). The VIF indicates whether a predictor has a strong linear
relationship with other predictor(s). As a rule of thumb, if the VIF of a variable exceeds 10, there
will be a serious multicollinearity problem. The tolerance statistics, which is the reciprocal of VIF
(1/VIF), also used to test multicollinearity. Tolerance values below 0.2 indicates serious
multicollinearity problem.
43
Table 4-10: Multicolliniarity Test
Model
Collinearity Statistics
Tolerane
1
VIF
Product
.858
1.166
Price
.955
1.047
Promotion
.964
1.037
Place
.863
1.159
Source: Own survey, 2022
As clearly seen from the above Table that there is no multicollinearity issue, whereby the VIF
value is less than 10 and the value of tolerance is not below 0.2(Field, 2005). Hence, the
assumption of multicollinearity has not been violated
4.6.2
Linearity
The linearity of the relationship between the dependent and independent variable represented the
degree to which the change in the dependent variable is associated with the independent variable
(Hair et al., 1998). In a simple sense, linear models predict values falling in a straight line by
having a constant unit change (slope) of the dependent variable for a constant unit change of the
independent variable (Hair et al., 1998). Conventional regression analysis will underestimate the
relationship when nonlinear relationships are present, i.e., R2 underestimates the variance
explained overall and the betas underestimate the importance of the variables involved in the nonlinear relationship (Malhotra et al. 2007). Substantial violation of linearity implies that regression
results may be more or less unusable (Malhotra et al. 2007). The scatter plots of standardized
residuals versus the fitted values for the regression models were visually inspected. The plots did
not reveal any systematic pattern, thus providing support for the specified linear relationship, as
suggested by (Malhotra et al. 2007).
44
Figure 4-1: Scatter plot
Source: Own survey, 2022
4.6.3
Normality of the Error Term Distribution
In terms of this assumption, a check for normality of the error term is conducted by a visual
examination of the normal probability plots of the residuals (Malhotra et al., 2007). Malhotra et
al. (2007) propose that normal probability plots are often conducted as an informal means of
assessing the non-normality of a set of data. According to Hair et al. (1998), the plots are different
from residuals plots in that the standardized residuals are compared with the normal distribution.
In general, the normal distribution makes a straight diagonal line, and the plotted residuals are
compared with the diagonal (Hair et al., 1998). If a distribution is normal, the residual line will
closely follow the diagonal (Hair et al., 1998). Malhotra et al. (2007) explain that the correlation
coefficient‖ will be near unity if the data fall nearly on a straight line. The correlation coefficient‖
will become smaller if the plot is curved. The normality probability plots were plotted to assess
normality. The P-P plots were approximately a straight line instead of a curve. Accordingly, the
residuals were deemed to have a reasonably normal distribution, as suggested by Hair et al.
(1998)
45
Figure 4-2: Normal p-p plot of regression standardize Residual
Source: Own survey, 2022
4.6.4
Homoscedasticity (Equal Variance)
Homoscedasticity of variances is an assumption of similar variances in several teams being
compared. To check for homoscedasticity (constant variance) the Levine„s test was employed. It
was used to test whether the variances of the two samples are approximately equal. To conduct
Levine„s test and check the Homoscedasticity of the variances of the first group and the variances
of the second groups used the following table.
Table 4-11: Levene's Test of Equality of Error Variancesa
Dependent Variable: profit
F
df1
df2
Sig.
.542
321
3
.861
Tests the null hypothesis that the error variance of the dependent variable is equal across groups
a. Design: Intercept + product + price + promotion + place + price * promotion * place
Source: Own survey, 2022
In Levine„s test, there are two assumptions to decide whether there is equal variance or not
between different groups: The first Assumption is if the significant value of Levine„s test is
greater than 0.05 the Levine„s test is non-significant and equal variance is assumed. The second
assumption is if the significant value of Levine„s test is less than 0.05 the Levine„s test is
46
significant so, equal variances are not assumed. Based on the above two assumptions and the
above table information indicates that the significant value is greater than 0.05 (0.861>0.05)
shows that Levine„s test is non-significant and the equal variance is assumed therefore, the
Homoscedasticity assumption of this study was not violated. The study discussed three major
assumptions that must be fulfilled for one to analyze data using multiple linear regression models.
So, since all three assumptions were not violated, so, the researcher was examined the data
collected by the questionnaires using correlation and multiple linear regression models to examine
the relationship of variable
B Multiple Regression Analysis
Multiple regressions is an extension of simple linear regression. It is used when we want to
predict the value of a variable based on the value of two or more other variables. The variable we
want to predict is called the dependent variable (or sometimes, the outcome, target or criterion
variable). The variables we are using to predict the value of the dependent variable are called the
independent variables (or sometimes, the predictor, explanatory or regressor variables). Multiple
regression, also allows you to determine the overall fit (variance explained) of the model and the
relative contribution of each of the predictors to the total variance explained (Laerd, 2013).
To examine the impact of the marketing strategy variables on the MSEs profitability, multiple a
regression was applied to the data set. The main aim here was to see the extent to which
profitability is affected by the marketing mix variables shown in terms of the Adjusted R-squared
value, the regression coefficients (Beta coefficient) and the p-values for the significance of each
relationship. Regression analysis is a statistical measure that attempts to determine the strength of
the relationship between one dependent variable and a series of other changing variables (known
as independent variables). More specifically, regression analysis helps one understand how the
typical value of the dependent variable changes when any one of the independent variables is
varied, while the other independent variables remain constant. Next, for this study, regression
analysis is used to identify the impact of marketing mix strategy on MSEs profitability in order to
answer the main research question
47
Table 4-12: Regression model summary of marketing mix elements (4Ps
Model Summary
Model
1
R
.864a
R
Adjusted R
Square
Square
.747
Std. Error of the Estimate
.744
.23282
a. Predictors: (Constant), Place, Promotion, Price, Product
b. Dependent Variable: Profitability
Source: Own survey, 2022
As shown from the above Table, the regression analysis, there is a positive statistical relationship
between marketing mix strategy (the independent variable) and profitability (the dependent
variable). The coefficient of determination (R-squared) indicates the proportionate amount of
variation in the response variable (profitability) explained by the independent variable (marketing
mix 4Ps) in the linear regression model. The larger the R-squared is, the more variability is
explained by the linear regression model. Thus, 74.7% (R2 =.747) of the variation on MSEs
Profitability is explained by the 4 Ps of marketing mix elements.
Table 4-13: ANOVA of marketing mix elements on profitability
Model
1
Regression
Sum of
Squares
51.181
ANOVAa
df
4
Mean Square
12.795
F
Sig.
236.0
55
.000b
Residual
17.345
320
.054
Total
68.526
324
a. Dependent Variable: Profitability
b. Predictors: (Constant), Place, Promotion, Price, Product
Source: Own survey, 2022
The ANOVA table showed the significance of relationship between the profitability and
marketing mix strategies (product, price, promotion, and place). According to the ANOVA table
the value of p-was 0.000 at 95% confident level and F critical value was 236.055. Since the pvalue was statically significant, therefore, there was an acceptable relationship observed between
profitability and marketing mix strategies (product, price, promotion, and place).
48
Table 4-14: Regression Coefficients
Model
Unstandardized Coefficients
Standardized
t
Sig.
Coefficients
B
1
Std. Error
(Constant)
.714
.160
Price
.154
.029
Product
.209
Promotion
Place
Beta
4.471
.000
.155
5.382
.000
.035
.181
5.971
.000
.007
.029
.007
.233
.816
.534
.022
.740
24.444
.000
a. Dependent Variable: Profitability
b. Predictors product, price, promotion and place
Source: Own survey, 2022
All of the regression coefficients (Beta Coefficients) between the 4Ps and MSEs profitability have
positive values. Hence, there is no inverse relationship between the marketing mix variables and
MSEs profitability. The findings revealed that, independent variables Price ( = 0.154; P<.05);
product; ( = 0.209; P<.05), and place ( = 0.534; P<.05) ; have a positive as well as significant
relationship with the independent variable, i.e. profitability. However, Promotion failed to show
significant relationships with the MSEs profitability but maintained positive ones.
The empirical findings also indicated that Place is the strongest predictor or has the most
significant impact in the MSEs profitability because it has the highest Beta coefficient result ( =
0.534; p<.05). The Beta Coefficient result of 0.534 signifies that for a 1 unit change in the
independent variable (place), the dependent variable (profitability) will change 0.534units. It is
apparent from this result that place is a decisive factor that affects MSEs profitability. This result
implies that Distribution creates convenience for customers and achieves basic, yet significant,
benefits such as time, place, form and delivery benefits for MSEs customers. According to the
regression equation established, taking all the four marketing mix strategies into account constant
at zero, profitability of the MSEs Will be 0.714. The data findings analyzed also shows that taking
all other independent variables at zero, a unit increase in product strategy will lead to a 0.209
increase in MSEs profitability; a unit increase in price strategy will lead to a 0.154 increase in the
49
case MSEs. Profitability; a unit increase in promotion strategy will lead to a 0.007 increase in
profitability of the MSEs. and a unit increase in place strategy will lead to a 0.534 increase in
profitability of in the case MSEs in Bishoftu town.
Ŷ= 0.714+ 0.209 X1+ 0.154X2 + 0.007x3 + 0.534X4
4.7 Comparison of Findings with Previous Studies
In this part, a comparison is done between the findings of this study and previous empirical
evidence. As can be observed from the table below, some of the results obtained in this study are
in line with the previous empirical findings while some are different.
Table 4-15: Comparison between findings in this study and previous empirical evidence
Author(s)
Results
Results of this Study
Shita (2021)
Product has positive correlation with profitability
insignificant Effect on profitability.
but Product has positive correl
ation and significant effect
on profitability
Melkamze
Product, price, place, people and physical evidences) Product, place and price
(2021)
were significant and positive association joint predictors were show positive and
of organization performance in. Promotion and processes significant, while, promoti
marketing
mix
had
negative
association.
Kenu(2019)
but
insignificant on shows positive and insig
nificant to profitability
The relationship between place and SMEs performance The relationship between
was found significantly negative (r=-0.188, =.01, place and MSEs found sign
ificantly positive
p=0.003)
Srinivasan and Product and place strategies had a positive and Product, place and price
Adaro (2019)(
significant effect on sales performance, and remaining were show positive and
other two variables such as pricing and promotion significant, while, promoti
strategies had positive but not made a significant effect on shows positive and insig
on sales performance of MSEs
Abayneh
nificant to profitability
Place and price have a strong positive relation and Product, place and price
50
(2019)
significant effect on profitability. On the contrary, were show positive and
product and promotion have positive but insignificant significant, while, promoti
effect on profitability on those automobile dealers on shows positive and insig
located in Addis Ababa
Gizaw (2018)
nificant to profitability
Product, price and distribution marketing mixes shows Product, place and price
significant and positive association, promotion marketing were show positive and
mix had positive but insignificant association with export significant, while, promoti
performance
on shows positive and insig
nificant to profitability
Owomoyela et Place has significant effect on business performance
Place has a positive and
al (201 3);
significant
relationship
with profitability
Wruuck (2013)
Pricing in banks has impact on customer satisfaction and Price has a positive &
profitability
significant
relationship
with profitability
Source: Own survey, 2022
4.8 Discussions of the Results
As the coefficient of the regression model indicates that the independent variables the empirical
findings indicated that independent variables Price ( = 0.154; P<.05); product; ( = 0.209;
P<.05), and place ( = 0.534; P<.05); have a positive as well as significant relationship with the
independent variable, i.e. profitability These results are in line with Melkamze (2021) Akroush
(2011); Colpan (2006); Owomoyela et al (2013);Ambler (2000); Chiliya et al, (2009) and
Owomoyela et al, (2013) who agreed that marketing mix strategy is the blood of business
organization. However, Promotion failed to show significant relationships with the organizational
profitability but maintained positive ones. agreed with Gizaw (2018), Abayneh (2019),and
Srinivasan and Adaro (2019) studies but this result has contrary opinion to the previous
researches and this may be due to the MSEs cannot use electronic media to advertise their
products like branded companies because of limited financial resource and more over literacy
proportion of the people in the local area might be considerably low and these hampering the
effectiveness of the product reach.
51
Place is the strongest predictor or has the most significant impact in the organization profitability
because it has the highest Beta coefficient result ( = 0.534; p<.05). This simply means the
location, accessibility and channel of distribution employed by business organization is a major
concern. This supported by Gizaw (2018), Abayneh (2019), Owomoyela et al (2013) and
Srinivasan and Adaro (2019) however, Kenu (2019) study show that the relationship between
place and SMEs performance was found significantly negative (r=-0.188, =.01, p=0.003). The
study also indicates that price consideration has a significant positive impact on business
performance Wruuck (2013), Gizaw (2018),Abayneh (2019),and Srinivasan and Adaro (2019).
This is because many consumers are motivated to buy products at lower prices. The customer
base in the low price segment of the product market is big. These customers in the low-cost
segmental ways look for products that offer value for money.
52
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
Introduction
This chapter summarizes the findings of the study and the conclusions drawn from the analysis.
The study mainly examined the impact of marketing mix strategy on organizational profitability
in the case of MSEs in Bishoftu town this chapter presents, major findings, conclusions and
recommendations based on the analysis and interpretations made at the pervious chapter.
5.1 Summary of Findings
The demographic background of the respondents revealed that,
 The demographic characteristics of respondents show that 50.5% respondents were male
and 49.5% were females
 Among the respondents the age of majority were between 20 and 40 years old that
accounts 67.7%. 22.2% was fallen between 41-50 5years, 6.2 % was between 51-60 years,
3.1 % was above 60 and the remaining 0.9% are between 50-60 years
 In regards to educational level of the respondents that 42.5% respondents were diploma
holders 33.8% respondents were degree level, and23.6% respondents were below
certificate
 37.5%respondents had work experience between 3-5 year, 56 (34.8%) respondents had 5
to 9 years, 26.5%respondents had below three year and 1.2 % respondents had above 9
years work experience
 From the total 45,5.% respondents were married, 37.5% were single, 8.9% were divorced
and 8.3% were. Widowed
 Regarding their business field that 50 (26.52) respondents had experience in the service
field, 24.6% respondents had in trade experience, (23.7%) respondents had in construction
field experience, 17.2% respondents had in manufacturing and 8.3% in urban agriculture
business experience.
53
 Most respondents sowed moderate and good agreement with the marketing mix strategies
by choosing average rate of the scale to a product have a mean score of 3.585 with SD of
0.33, the price has a mean score of 4.08 with SD of 0.12, the place has a mean score of
3.58 with SD of 0.38, and promotion has a mean a score of 2.6 with SD of 1.13. Besides
the perception of the respondents towards profitability had a mean score of 3.46 with an
SD of 0.981.
The empirical results from correlation and regression analysis show that
 place r= (0.830, p<0.01), has strong, positive and significant correlation with profitability,
while product r= (0.464, p<0.01) and price r= (0.306, p<0.01) have a moderate effect with
significant correlation .regarding promotion r= (0.133, p>0.01) it has weak effect and
insignificant in this study
 The empirical findings indicated that independent variables Price ( = 0.154; P<.05);
product; ( = 0.209; P<.05), and place ( = 0.534; P<.05); have a positive as well as
significant relationship with the independent variable, i.e. profitability. However,
Promotion failed to show significant relationships with the organizational profitability but
maintained positive ones.
 Place is the strongest predictor or has the most significant impact in the organization
profitability because it has the highest Beta coefficient result ( = 0.534; p<.05)
 74.7% (R2 =.747) of the variation on organization profitability is explained by the 4 Ps of
marketing mix elements.
5.2 Conclusions
Marketing is a key element for the success of businesses regardless of their size, sector, nature of
work and even their aims or objectives. Based on the study findings the study concludes that
marketing strategies influence the profitability of micro and small enterprises in Bishoftu town.
Due to intense competition, the MSEs have to consider seriously quality, durability and
innovations in its product offerings to sustain in the competitive market. To overcome the
mounting challenges and ensure sustainable growth and profitability, there is an urgent need to
54
adopt purposeful marketing strategies that are focused around customers‟ needs and there is a
need to implement them effectively. Empirical findings in the study revealed the independent
variables jointly explained 74.7%% of variation in performance of MSEs. Product, price and
place have positive and significant effect on the enterprises performance therefore, owners of
these business ventures needs to work vigorously on improving of marketing mix strategies. The
place strategy got more prominent role in increasing profitability than all other strategies. The
promotion strategy insignificant effort to enterprises operation; thus, they should re-investigate
the way they promote product to buyers profitability.
5.3 Recommendations
 MSEs have to design very strong and effective distribution strategies to ensure and
availability of their products in the markets as equal to other branded organizations
products. In addition to conventional distribution strategy, the MSEs have to adopt both
the direct and indirect distribution channels to enhance its profitability in the specific
market segmentation than the branded companies‟ products.
 The packaging design, visibility, durability and safety of the products have to be ensured
and improved to support the profitability of MSEs and it helps to compete with the
branded products available in the market.
 The MSEs have to adopt initially a penetrating pricing strategy to grab a particular market
segment gradually because most of the MSEs Customers are lower and middle class and
their affordability is low. Price fixation policies have to be flexible enough and support
profitability according to the changes occurred in the local markets. It has to be reasonable
than the branded products to increase customer‟s purchase intention.
 Because of limited financial resource, MSEs cannot use electronic media to advertise their
products like branded companies these hampering the effectiveness of the product reach.
Therefore, they have to use posters, small size notices, and stickers in all places to make
known about the products and their availability to create awareness to the customers.
55
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62
APPENDIX
6.1 Appendix A: Research Questionnaire
Arsi University
College of Business and Economics
MBA Program
Questionnaire
Dear respondents;
The purpose of this questionnaire is to enable me to carry out a research for the partial fulfillment
of master‟s degree in Business Administration. The research focuses on the topic of “The impact
of Marketing Mix Strategy on Profitability in te case of MSEs in Bisoftu”. I kindly seek your
assistance in responding to the questions listed below. Any information you present will be kept
confidential and will be used only for academic purpose. Your cooperation and prompt response
will be highly appreciated.
N.B: Writing your name is not necessary
Put “√” for your choice in the box provided
Contact Address
If you have any question, please contact me and I am available as per your convenience (Mobile:
0967814571
Thank You!!
63
Questionnaire
Part1Demographicinformation
1. Gender
A. Male
B. Female
2. Age
A. Above 20
D. 51- 60
B. 21- 30
E. 31 -40
C. 41- 50
F. Above 60
3. Educational status:
A. Below certificate level
B. Diploma
C. Degree
D. Above
4. Marital status:
A. Single
C. Divorced
B. Married
D. widowed
5 Indicate the period your business has been in operation
A. Less than 3year
B. 3-5 years
C. 5-9years
D. Over9years
6
Business field
A. Manufacturing
B. Trade
C. Service
D. Construction
E. Urban agriculture
64
Part 2 In relation to Marketing mix Strategies of MSEs in Bisoftu Please indicate your
opinion as per the level of disagreement or agreement with the outline statement using 1 to
5 scale guideline. 1= strongly agree 2- Agree, 3= Undecided, 4 =Disagree,
5= strongly Disagree
Product
S/ ITEMS
N
1
Product quality has a positive impact on
sales performance
2. Package design increases product visibility
and recognition
3. Product appearance, smell, flavor affect
sales volume
4. Packaging influence customer perceived
product quality
5. Customers complain about the quality of
your products.
6. Product perceived quality influence
purchase intention
7. Branding influences firm performance
Strongly
Agree
Agree
Undecided Disagree Strongly
Disagree
8
Firms brand image, and loyalty has an
influence on profitability of a company
9
Packaging is used to attract attention
10 Brand
awareness
influence
an
organizational performance
11 MSEs are efficient in meeting customer
wants
Price
Strongly
S/N
ITEMS
Agree
1.
Use of pricing strategy has
increased profitability
2.
Value-based pricing has a
positive impact on profitability
3.
Use of penetration pricing
influences customer purchase
4.
Price penetration has a positive
effect
on
growth
and
performance of organization
5.
Price
promotion
strategies
affect profitability
6.
Use of price discount influences
profitability
7.
MSEs offer products in lower
prices market segment
8.
9.
10
MSEs use penetration pricing to
increase product adoption
Price promotion has a significant
impact on perceived product
quality
Pricing is a basis for competition
65
Agree
Undecided
Disagree
Strongly
Disagree
among MSEs
Promotion
S/N ITEMS
1
2
3
4
5
6
7
8
9
Strongly
Agree
Strongly
Agree
Agree
target customers
Through your distributional
channels
Use of distribution channels
influences sales and profit
3.
Geographic location has a
significant influence on
profitability
4
Close location of MSEs
selling similar products
affects performance
5
Physical surrounding
(finishing, good working
environment)is have any
effect on sales
6
Use of attractive stimuli such
as music has an influence on
customers
7
MSEs are accessible to
customers
8
Undec
ided
Disagree
Strongly
Disagree
Sales promotions influences sales
volume
Use of sales promotion has increased
brand loyalty of MSEs
Advertising has increased sales of MSEs
Use of sales promotion create interest
and brand awareness
Use of direct marketing led to an
increase in profit
MSEs offer price discounts and coupons
MSEs uses personal selling and publicity
to promote their products
MSEs advertise their products through
various media
MSEs introduce new products in design
and style
Place
S/ ITEMS
N
1 Your products get to the
2.
Agree
MSEs was place their
66
Undecided
Disagree
Strongly
Disagree
products or services to gain
market share
Part 3 Relationship between marketing mix strategy to company profitability performance
Strongly
Agree
S/N
ITEMS
1
Your organization achieved maximum
profitability as a result of
the application of product strategy
Your organization achieved maximum
profitability as a result of the application
of
Pricing strategy.
Your organization achieved maximum
profitability as a result of the application
of
promotional strategy
Your organization achieved maximum
profitability as a result of the application
of
distribution strategy
Generally Your organization achieved
Maximum profitability as a result of the
application of strategies to the marketing
mix.
2
3
4
5
67
Agree Undecided Disagree Strongly
Disagree