Impact Of Branding On SME Performance

Abstract

For large businesses, branding is accepted as an important factor for the success of the business. But, is it the same for SMEs? This study attempts to determine the effects of branding on performance of SMEs in the Kuala Lumpur and Selangor areas of Malaysia. It is meant to support the Resource-Based View (RBV) theory of management, which highlights that possessing valuable, rare, intangible, non-imitable assets will improve the company’s performance. Review of literature shows that there are four dimensions often used to describe brand or branding, comprising branding strategies, branding practices, branding investment and brand associations, which are related to performance. The performance measure used in this study is financial performance represented by profitability, sales growth and performance as compared to industry. Data were collected from SMEs in the Klang valley. A total of 175 SMEs provided data for analysis. Regression results show that the model is significant and explains 23% of variations in firm performance. Three dimensions of brand or branding significantly contribute to performance. They are branding practices, brand associations and branding strategies. The study suggests that performance of SMEs can be improved through the use of branding. It also adds support to the RBV theory in that intangible assets contribute to competitive advantage and performance of SMEs.