heoretical Framework

​This portion delves into the concepts of financial performance and marketing strategies.
Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues and a general measure of a firm's overall
financial health over a given period. In this paper key indicators that may influence Micro
business enterprises and BMBEs’ financial health are the liquidity, leverage and profitability.
Marketing strategies on the other hand are the tactical tools employed to reach and influence
target customers, are explored through the well-known 4Ps framework: price, product, place,
and promotion. This study is anchored on two key theories: Market Orientation Theory and
Competitive Advantage Theory, which collectively provide a solid foundation to explain the
relationship between marketing strategies and financial performance of Barangay
Micro-Business Enterprises (BMBEs) and micro-businesses in Baguio City.
Market Orientation Theory
Market orientation is an approach to business that prioritizes identifying the needs and
desires of consumers and creating products and services that satisfy them. Companies that
have a market orientation consider the opinions and needs of their target market as a critical
component of their research and development (R&D) for new products. It may sound obvious,
but advocates of market orientation argue that the conventional approach to product
development is the opposite. That is, marketing strategies focus on establishing key selling
points to promote existing products rather than designing products that have the qualities
consumers say they want. Even consumer demands that are impractical today can inform
long-range decision-making (Kopp, 2021).
Furthermore, A market-oriented company has a dual vision in that it simultaneously
maintains a focus on customers and the competition. Continuous monitoring of the competition
allows firms to shift their operations to meet inroads from the competition. Internal discussions of
competitor strengths and weaknesses allow the firm to counteract competitor strengths while
simultaneously exploiting weaknesses (Tokarczyk, et al. 2007). In addition, market orientation is
defined in terms of a culture that effectively and efficiently creates the necessary firm behaviors
for the creation of superior value for buyers. Important behaviors relate to acquiring and then
disseminating information about buyers and competitors. Thus these authors proposed three
components to market orientation: customer orientation, competitor orientation and
inter-functional coordination. The first two, being orientation constructs, tap the focus or subject
of the firm's information gathering activities (what/how do firms sense in the external
environment).
In relation to this study, Market Orientation Theory explores how it influences the
development of marketing strategies for BMBEs. By focusing on customer-centric approaches,
these businesses can create targeted marketing campaigns that resonate with their audience,
enhancing brand loyalty and driving sales. Market orientation holds significant implications for
the financial performance of Microenterprises and Barangay Micro Business Enterprises
(BMBEs), particularly given their localized operations and limited resources. By prioritizing the
identification and satisfaction of customer needs, BMBEs can directly enhance their revenue
streams. Understanding the specific desires of their immediate community allows these
enterprises to tailor their products and services, leading to increased sales and customer loyalty.
This approach minimizes wasted resources, as BMBEs focus on developing offerings with
proven demand, thereby reducing inventory and production costs. Furthermore, the dual focus
of market orientation, encompassing both customer needs and competitive analysis, equips
BMBEs to adapt and thrive in their local markets. By continuously monitoring competitors, they
can identify opportunities to differentiate themselves, offering unique value propositions that
attract and retain customers. This proactive stance enables BMBEs to build a sustainable
competitive advantage, ensuring their long-term financial stability. Ultimately, embracing market
orientation fosters a culture of adaptability and responsiveness, crucial for BMBEs navigating
the dynamic landscape of local commerce.
At the broader industry level, the application of Market Orientation Theory is essential in
strengthening the overall competitiveness and sustainability of the micro-enterprise sector.
When market orientation becomes a common practice among BMBEs and micro-businesses, it
elevates industry standards by encouraging businesses to offer products and services that are
more aligned with evolving consumer needs. This collective responsiveness fosters healthy
competition, stimulates local market growth, and enhances the capacity of the sector to
contribute to economic development. In the context of Baguio City, where BMBEs are integral to
the local economy, a market-oriented industry environment can drive innovation, improve
service quality, and promote financial viability across the sector. Therefore, this theory not only
explains firm-level behaviors but also underscores how market orientation practices can
enhance the resilience and sustainability of the entire microbusiness industry.
Competitive Advantage Theory
Complementing this, Competitive Advantage Theory suggests that businesses can achieve
superior financial performance by developing unique marketing strategies that differentiate them
from competitors. According to Twin (2024), Competitive Advantage Theory explains the
connection between marketing strategies and financial performance by emphasizing how
businesses leverage unique strengths to outperform competitors, thereby driving profitability
and growth.
Additionally, Hunt (2011) asserts that competitive advantage occurs when an organization
acquires or develops attributes that enable it to outperform competitors. These attributes may
include unique products, cost-efficient operations, or strategic use of available resources, all of
which contribute to enhanced financial performance. A central tenet of Competitive Advantage
Theory is that firms can pursue this advantage through two primary strategies: cost leadership
and differentiation. These concepts, originally introduced in Porter’s Generic Competitive
Strategies, have since been widely adopted in business strategy literature as the fundamental
ways to operationalize competitive advantage. Cost leadership involves offering products at
lower prices than competitors by achieving operational efficiency, while differentiation focuses
on creating unique products or services that deliver superior value to customers (Twin, 2024;
Hunt, 2011).
In the context of this study, Competitive Advantage Theory serves as the basis for
understanding how the effective application of marketing strategies— specifically through the
4Ps framework of Product, Price, Place, and Promotion—can improve the financial performance
of BMBEs and micro-businesses. BMBEs can achieve competitive advantage by leveraging
these strategies to create unique value propositions, allowing them to outperform competitors
and sustain their financial performance. Specifically, they may adopt cost leadership strategies
by offering affordable products through efficient business operations or differentiate themselves
by providing unique products or services tailored to their target market. By doing so, these
businesses may improve key financial indicators, including profitability, liquidity, and financial
leverage.
At the industry level, the relevance of Competitive Advantage Theory lies in highlighting how
the collective adoption of strategic marketing practices can contribute to the growth and
resilience of the micro-business sector. When BMBEs and micro-businesses effectively
implement cost leadership or differentiation strategies, it fosters a more competitive and
dynamic local business environment. In Baguio City, this may help strengthen the overall
capacity of the micro-enterprise sector to sustain local commerce and support economic
development. However, in this study, Competitive Advantage Theory is applied not to evaluate
large-scale industry competition but to explain how small businesses like BMBEs can benefit
from marketing strategies that provide them with a practical financial edge within their local
markets. It offers a framework for understanding how strategic marketing efforts may enhance
financial performance even in small-scale, resource-constrained business environments such as
Baguio City.
Furthermore, this theory complements Market Orientation Theory by extending the
behavioral orientation toward the realization of tangible financial outcomes. While Market
Orientation Theory focuses on how businesses gather market intelligence and respond to
customer and competitor information, Competitive Advantage Theory explains how these
market-driven strategies, when systematically applied, lead to superior business performance.
Together, these theories provide a comprehensive framework for understanding how
market-oriented behaviors shape marketing strategies and, subsequently, how these strategies
contribute to the financial performance and competitiveness of BMBEs and micro-businesses.
By integrating both theories, this study underscores that marketing strategy adoption is not
merely operational but strategic in nature. For BMBEs and microbusinesses, formulating
market-driven strategies and translating them into competitive advantage is essential in
enhancing financial performance and ensuring long-term viability.
Conceptual Framework
Considering these insights, this study focuses on liquidity, leverage, and profitability as core
measures of MSME and BMBE financial performance. Mendoza’s (2015) research underscores
their importance in evaluating financial health, emphasizing that liquidity ratios determine a
firm’s ability to meet short-term obligations, leverage ratios provide insights into debt-equity
balance, and profitability ratios measure resource utilization efficiency and the ability to generate
sustainable returns. Since these dimensions collectively provide a comprehensive perspective
on financial performance and health, they serve as a strong foundation for understanding and
addressing the financial constraints of MSMEs and BMBEs.
Marketing Strategy
A marketing strategy refers to a business’s overall plan to convince customers to buy its
products or services. It outlines how to reach prospective consumers and turn them into
customers by defining the company’s value proposition, key brand messaging, and target
customer demographics. The ultimate goal of a marketing strategy is to achieve and
communicate a sustainable competitive advantage over rival companies. Achieving this requires
a clear understanding of customer needs and preferences and the effective communication of
the company’s core value proposition through various marketing assets, such as print
advertisements, product customization, or social media campaigns (Team, 2024).
For BMBEs, marketing strategies play a crucial role in improving financial performance and
enhancing competitiveness. Given their limited scale and financial resources, BMBEs operate in
resource-constrained and highly competitive environments. In this context, well-defined
marketing approaches are vital for increasing visibility, fostering customer relationships, and
generating revenue. Effective marketing also helps establish a distinct brand identity by
understanding local markets, leveraging community connections, and adapting to consumer
preferences. Utilizing both traditional and digital tactics enables BMBEs to expand their reach,
build customer loyalty, and foster trust.
In this study, marketing strategy is considered a key factor in understanding its relationship with
the financial performance of BMBEs and micro-businesses in Baguio City. Specifically, the study
operationalizes marketing strategy through the 4Ps framework—Product, Price, Place, and
Promotion. It examines how the extent of adoption and implementation of these strategies may
influence financial outcomes, particularly in terms of profitability, liquidity, and leverage. The
study aims to determine whether well-structured and context-specific marketing strategies
contribute to improved financial performance among BMBEs.
Moreover, the study recognizes that BMBEs often encounter unique challenges in accessing
advanced marketing resources due to their limited scale and financial capacity. Therefore, the
research aims to provide insights on how fundamental and accessible marketing strategies can
be optimized to improve the financial viability of these enterprises. Understanding the role of
marketing strategy in this regard is crucial in supporting the sustainability and competitiveness
of BMBEs within the local micro-business sector.
4Ps of Marketing Strategy
Also known as the marketing mix, is a foundational framework that outlines the key elements
involved in marketing a product or service. Developed by E. Jerome McCarthy in 1960, this
theory emphasizes the importance of four critical components: Product, Price, Place, and
Promotion. Each element plays a vital role in crafting effective marketing strategies that
resonate with target audiences (Twin, 2024). Moreover, according to Yasar (2022), the 4 Ps are
interconnected; changes in one area can affect others. For example, a high-quality product may
justify a higher price point but requires effective promotion to communicate its value. Similarly,
selecting appropriate distribution channels (place) can enhance promotional efforts by ensuring
that advertisements reach consumers where they shop.
This study posits that the 4Ps of Marketing provide a valuable framework for improving
BMBE and microbusinesses’ marketing effectiveness and financial performance. The 4Ps
framework is considered more practical for BMBEs and micro-businesses, as it focuses on
fundamental areas without requiring advanced marketing resources. By analyzing product
alignment with local needs, pricing strategies, distribution channels, and promotional methods,
the study aims to offer actionable insights. Examining the Product allows for innovation and
differentiation, Price ensures profitability and competitiveness, Place focuses on accessibility
and local network utilization, and Promotion emphasizes cost-effective methods like social
media and community engagement. Ultimately, this research seeks to demonstrate how
strategic marketing decisions based on the 4Ps can drive financial sustainability and growth for
BMBEs and micro-businesses, contributing to community economic vitality.
 Price. Price, the amount consumers pay for a product, is a crucial marketing element that
must reflect both real and perceived value, while considering supply costs, discounts, and
competitor pricing (Twin, 2024). Marketers strategically adjust prices to create perceptions of
luxury or attract wider consumer bases but must carefully consider the impact of discounting on
perceived value. Singh (2016) emphasizes that price is the exchange value for an offering, and
that dynamic pricing is essential due to constantly changing market variables, including
production costs, marketing strategies, and distribution expenses.
For BMBE retail stores, the "Price" component is vital, balancing customer attraction and
financial sustainability. This study analyzes how strategic pricing decisions impact these
micro-retailers' viability and growth by examining how they set prices considering competitor
pricing, costs, and customer purchasing power. It explores how BMBEs navigate competitive
and profitable pricing, and investigates the direct link between pricing, profitability, and liquidity.
The research aims to provide insights on optimizing pricing for long-term financial success,
empowering BMBEs to make informed decisions that balance affordability with cash flow needs.
Building upon this understanding, micro-enterprises like BMBEs employ adaptive pricing
strategies to navigate their competitive yet resource-constrained markets. Singh (2016) asserts
that pricing requires constant adjustments based on market conditions, a principle reflected in
various approaches observed among small-scale businesses. Mapila et. al., (2014) confirmed
that customer purchasing behavior significantly influences pricing decisions within
microenterprises. Mapila et. al., (2014) confirmed that factors like the volume of products
purchased or the total amount of money spent directly determine the discounts offered to
customers. This suggests that microenterprises often adapt their pricing and discount strategies
based on how much or how often customers buy.
For instance, many micro-enterprises implement cost-plus pricing, applying markups of
15-20% to cover production costs while staying responsive to supplier price fluctuations (Singh,
2016; Twin, 2024; Kopp, 2021). This practice underscores the balance between cost recovery
and profitability, highlighting the necessity of adjusting prices in response to supply chain
dynamics. Additionally, Yasar (2022) emphasizes that businesses frequently benchmark prices
against competitors, a method supported by Kopp (2021) that enables businesses to maintain
market relevance and attract consumers.
Beyond cost-based pricing, Singh (2016) explains how micro-businesses and BMBEs
leverage psychological pricing techniques to influence consumer perception and purchasing
behavior. Examples include charm pricing (e.g., ₱99 instead of ₱100) and limited-time
promotions, which create a sense of affordability and urgency, thereby driving customer
engagement (Singh, 2016; Ujano, 2024). Seasonal price adjustments during peak demand
periods, such as holidays and local festivals, further illustrate how businesses align pricing
strategies with fluctuating consumer demand, a trend documented by Twin (2024) and Ujano
(2024). Moreover, Singh (2016) highlights the importance of customer loyalty initiatives, such as
exclusive discounts for repeat buyers, in fostering long-term relationships. Twin (2024)
elaborates on how businesses strategically lower prices for slow-moving inventory to enhance
liquidity, ensuring continued cash flow without significantly impacting overall profitability.
These pricing strategies reveal how microenterprises balance short-term competitiveness
with long-term sustainability. By continuously adapting their pricing models, as noted by Singh
(2016), they translate theoretical pricing principles into practical business decisions, reinforcing
financial resilience in dynamic retail environments.
Product. Product refers to a physical product or service for which a consumer is ready to pay.
It includes tangible goods like furniture; garments, grocery items etc. and intangible products
like services are purchased by consumers (Singh, 2016). Moreover, the product is also the
physical appearance of the product, packaging, and labelling information, which can influence
whether consumers notice a product in-store, examine it, and purchase it Mohammad et al.
(2012). Additionally, according to Twin (2024), defining the product also is key to its distribution.
Marketers need to understand the life cycle of a product, and business executives need to have
a plan for dealing with products at every stage of the life cycle.
In the context of BMBEs, product selection and development are pivotal in sustaining
competitiveness. Twin (2024) and Kopp (2021) highlight the importance of inventory
adjustments based on purchasing behavior and customer requests, illustrating how businesses
adapt to meet evolving consumer needs. Additionally, Singh (2016) emphasizes the value of
incorporating trending items while maintaining a core selection of staple products, which
ensures micro-businesses remain relevant in dynamic markets.
Micro-enterprises also benefit significantly from strategic product placement. Twin (2024)
observes that positioning popular items for maximum visibility and designing store layouts for
ease of navigation can enhance customer experience and sales. Similarly, Yasar (2022)
identifies maintaining product quality through expiration date checks, proper storage protocols,
and the timely removal of damaged goods as essential factors in building customer trust—a
sentiment echoed by Kopp (2021) and Singh (2016). Effective inventory management is another
critical aspect. Singh (2016) and Twin (2024) note that adjusting stock levels to account for
holidays and local events ensures the availability of essential products year-round. Sembiring et
al. (2019) likewise emphasize the practicality of the FIFO method, highlighting its role in
minimizing spoilage and enhancing inventory accuracy which are both crucial for efficient
inventory management. Furthermore, regularly introducing new items and providing alternatives
for out-of-stock products, as described by Singh (2016) and Yasar (2022), sustain customer
satisfaction despite supply chain challenges.
By examining these established strategies, this study aims to understand how BMBEs and
Micro Businesses select and develop products to succeed in local markets, exploring the
strategic process of identifying and creating offerings that resonate with their target audience. It
investigates how BMBEs and Micro Businesses use local knowledge, cultural insights, and
market trends to inform product decisions, including adapting to seasonal changes and
incorporating sustainable practices. The research emphasizes the impact of product
differentiation on sales, analyzing how unique products reflecting local craftsmanship and
regional specialties attract both residents and tourists seeking authentic experiences.
Place. Place in marketing involves determining product availability, both in physical stores
and online, and optimizing its display, as well as selecting appropriate advertising media to
reach the target audience (Twin, 2024). It encompasses distribution channels, warehousing,
transportation, and inventory management, facilitating the movement of goods from producer to
consumer. For business products, direct client interaction is crucial. Effective distribution
significantly impacts profitability, necessitating strong supply chain and logistics management.
Furthermore, "Place" is interconnected with other marketing mix elements; for example, pricing
influences demand and distribution needs, while unique selling propositions can drive brand
awareness and pricing strategies, ultimately leading to product improvements based on
customer feedback (Singh, 2016).
This study examines BMBE and Micro Business Enterprises "Place" strategy, focusing on the
strategic selection and optimization of distribution channels to enhance market reach and
financial stability. It analyzes how these micro-businesses utilize various channels, including
physical stores, local markets, and online platforms, considering factors like target
demographics and product nature. The research delves into how BMBEs and Micro-businesses
optimize storefront locations and leverage local markets to maximize visibility, reach
price-sensitive customers, and foster local business relationships.
The strategic importance of place manifests concretely in how micro-enterprises, including
BMBEs and Micro-businesses, select and optimize their physical store locations. Twin (2024)
notes that many businesses establish operations in densely populated areas, such as
residential zones, schools, and workplaces, to ensure consistent foot traffic. Proximity to public
transportation hubs, such as jeepney stops, further enhances accessibility for both local and
visiting customers (Yasar, 2022; Singh, 2016). These location strategies embody broader
marketing principles by aligning business placement with target consumer behavior and
convenience.
Within these physical spaces, merchandising approaches play a critical role in reinforcing
product accessibility and visibility. Twin (2024) highlights the use of open product displays that
encourage customer interaction, while the strategic placement of bestselling items in
high-visibility areas strengthens the connection between place and consumer engagement.
These practices not only facilitate the movement of goods from producer to consumer but also
create engaging retail environments that support purchasing behavior. On the other hand, Yasar
(2022) and Ujano (2024) emphasize that security and maintenance practices are integral to
place strategy. Measures such as maintaining clean, well sanitized spaces enhance customer
experience, while theft prevention strategies, including mirrors and visible counters, contribute
to store security (Singh, 2016; Ujano, 2024). These practical applications help establish safe
and welcoming retail environments that foster customer trust and long-term loyalty.
Additionally, micro-retailers employ space optimization techniques to maximize limited
physical areas. Yasar (2022) and Kopp (2021) describe creative use of shelves and walls,
alongside adjustments based on customer flow patterns, as effective ways to overcome spatial
limitations while maintaining efficient product placement. Beyond the physical location, Singh
(2016) explains that community engagement further extends the concept of place into business
networking and customer retention strategies. Participation in local events and festivals enables
micro-enterprises to establish temporary market presence, while collaborations with nearby
businesses strengthen community ties (Twin, 2024). These outreach efforts demonstrate how
BMBEs and microbusinesses leverage local markets and relationships to enhance their visibility
and consumer reach.
Together, these operational strategies illustrate how BMBEs and other micro-businesses
translate the strategic importance of place into their daily business decisions. By integrating
location selection, merchandising, security, and community engagement, micro retailers create
both physical and social environments that support immediate sales while ensuring long-term
market presence.
 Promotion. Promotion aims to communicate product need and value to consumers,
encompassing advertising, public relations, and media strategy (Twin, 2024). It's a powerful
marketing mix element, including sales promotions like publicity, exhibitions, and
demonstrations, and is crucial for supplementing personal selling and advertising. The
marketing manager determines promotional expenditure, which should be considered a product
cost. Advertising, a key component, builds product image and maintains market dynamism. The
promotion mix ultimately influences product positioning and helps achieve marketing goals
(Singh, 2016).
For BMBEs and micro-businesses, "Promotion" is vital for visibility, customer engagement,
and financial health. This study analyzes how promotional strategies translate into business
outcomes by examining the use of cost-efficient tools like social media marketing and
participation in local community events. It explores how these activities build brand recognition
and drive customer interaction. The research focuses on how increased brand visibility,
achieved through effective promotion, leads to higher sales by analyzing the relationship
between promotional activities, customer traffic, and brand loyalty, including repeat purchases
and positive referrals.
The implementation of promotional strategies among BMBEs and micro-businesses reflects
a dynamic blend of traditional and digital approaches. Twin (2024) and Singh (2016) highlight
the effectiveness of personalized promotion through direct customer engagement, where
business owners actively recommend products to create tangible connections with customers.
This personal selling component of promotion underscores the importance of
relationship-building in fostering customer loyalty. For example, Twin (2024) emphasizes how
practices such as remembering customers' names and preferences, along with following up
after purchases (Kopp, 2021), extend promotional efforts beyond transactions, developing
lasting and meaningful relationships.
In addition, Singh (2016) observes that digital promotion has become indispensable in
extending the reach of BMBEs and micro-businesses beyond their physical locations. Platforms
such as Facebook Marketplace, Shopee, and Lazada provide cost-effective channels for
enhancing business visibility, as noted by Yasar (2022). Twin (2024) further highlights the
adoption of mobile payment solutions like GCash and Maya as a way to integrate convenience
into digital customer engagement. Prompt responses to inquiries (Twin, 2024) reflect the
proactive approach of micro-retailers, showcasing how BMBEs and micro-businesses optimize
technology to strengthen engagement and drive sales. These initiatives illustrate the synergy
between affordable promotional tools and the creation of impactful marketing strategies.
Seasonal and loyalty-based promotions constitute another cornerstone of BMBE and
micro-business marketing strategies. For instance, Singh (2016) explains how holiday sales and
exclusive rewards for loyal customers align with strategic timing and audience segmentation.
Seasonal discounts tied to cultural events such as fiestas and holidays capitalize on heightened
consumer spending patterns (Twin, 2024; Ujano, 2024), while loyalty programs strengthen
long-term relationships with repeat customers (Kopp, 2021). Singh (2016) asserts that tailoring
promotions based on customer feedback further illustrates the adaptive nature of BMBE
marketing efforts. By evaluating the performance of previous campaigns (Kopp, 2021) and
aligning future promotions with seasonal demand cycles, businesses bolster customer traffic
and sales.
 Visual merchandising serves as a complementary promotional strategy for BMBEs. Yasar
(2022) describes how eye-catching posters and attractive product displays enhance retail
environments, acting as silent sales aids. Twin (2024) elaborates on how these visual elements
shape customer perceptions, blending active promotional tactics with ambient retail
atmospheres. For example, strategically positioned posters create a seamless connection
between digital and physical outreach, thereby enhancing customer engagement.
These promotional strategies reflect how BMBEs and micro-enterprises utilize integrated
communication approaches, combining interpersonal engagement, digital platforms, strategic
timing, and visual appeal to thrive in competitive markets. Singh (2016) emphasizes that such
efforts contribute to enhanced brand visibility, stronger customer relationships, and ultimately,
financial sustainability—a sentiment echoed by Twin (2024) and other recent studies.
Financial Performance
Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. Financial performance is an indicator of the
financial stability and the health of a firm. It is a measure of how well a firm uses its assets to
generate revenues, a firm’s credibility, and its ability to pay off debts. Analysts and investors use
financial performance to compare similar firms across the same industry or to compare
industries or sectors in aggregate (Kenton, 2024).
In this study, financial performance is examined as a key outcome variable to assess
whether the implementation of structured marketing strategies, particularly the 4Ps framework,
influences the financial performance of BMBEs and micro-businesses in Baguio City.
Specifically, the study investigates whether differences in marketing strategy adoption
correspond to variations in the financial performance of these micro enterprises.
To provide a comprehensive evaluation, financial performance in this study is measured
through three core indicators: liquidity, leverage, and profitability. The selection of liquidity and
profitability is based on Mendoza’s (2015) framework, which highlights their relevance in
assessing the financial condition of microenterprises. To provide a more comprehensive
assessment, leverage is also included to account for the financial structure and debt exposure
of BMBEs and microbusinesses, recognizing its significance in evaluating financial performance
(Hayes, 2024). These indicators collectively offer a multidimensional perspective on the financial
performance of BMBEs and micro-businesses. Examining these metrics in relation to marketing
strategy adoption is essential in understanding how strategic marketing decisions may
contribute to the financial performance of these enterprises.
Liquidity. According to Hayes (2024), liquidity refers to the efficiency or ease with which an
asset or security can be converted into ready cash without affecting its market price. The more
liquid an asset is, the easier and more efficient it is to turn it back into cash. Less liquid assets
take more time and may have a higher cost. Liquidity refers to an organization's ability to
maintain sufficient cash or easily convertible assets in order to meet its short-term obligations
efficiently and without financial strain (Yameen, et al., 2019). This study adopts this definition as
the operational framework for liquidity. The level of liquidity usually varies depending on the
industry in which the company operates. A company with low liquidity may struggle to meet
obligations, increasing financial risk. Conversely, excess liquidity can also indicate inefficient
capital utilization, leading to lower profitability (Das, 2022).
 Effective liquidity management is crucial for BMBEs and micro-businesses to successfully
implement marketing strategies, as sufficient cash flow allows them to capitalize on growth
opportunities and fund marketing investments. Maintaining liquidity ensures they can cover
operational costs while launching marketing initiatives, respond to market changes, and mitigate
financial risks. This proactive approach prevents cash shortages that could hinder promotions or
market expansion, enabling BMBEs and micro-enterprises to leverage marketing for revenue
growth, competitiveness, and long-term financial sustainability.
Liquidity management is an essential mechanism that enables BMBEs to achieve financial
stability and address the operational challenges inherent in small-scale retail environments.
Yameen et al. (2019) highlight how stable liquidity allows micro-enterprises to meet daily
operational expenses, such as rent, utilities, and wages, while avoiding scenarios where
expenditures surpass earnings. This financial balance ensures consistent cash flow, enabling
timely payments to suppliers, employees, and government contributions, such as those for SSS
and PhilHealth (Yameen et al., 2019; Das, 2022). Das (2022) observes that this practice
reinforces the ability of BMBEs and micro-enterprises to fulfill short-term financial obligations
without experiencing undue strain.
A critical indicator of effective liquidity management, according to Hayes (2024), is the
capacity to maintain surplus funds after accounting for monthly expenses. This financial buffer
facilitates the creation of emergency savings, which can be crucial for addressing unforeseen
costs, such as equipment repairs or abrupt shifts in market conditions. Additionally, Hayes
(2024) underscores that the ability to access borrowed funds promptly, when necessary, serves
as an important liquidity safeguard, protecting against short-term disruptions that might
otherwise impact operational stability.
Das (2022) and Hayes (2024) further emphasize the role of inventory management as a
liquidity optimization strategy. By restocking supplies before depletion while avoiding the
excessive accumulation of slow-moving inventory, BMBEs and micro-enterprises strike a
balance that minimizes financial waste and maximizes cash flow efficiency. These practices are
particularly vital during peak and lean seasons, allowing businesses to navigate demand
fluctuations without compromising financial health (Das, 2022). The strategic alignment of
inventory levels with seasonal business cycles reflects the adaptability of liquidity management
principles in sustaining operational continuity.
These strategies collectively illustrate how BMBEs leverage liquidity management to not only
meet immediate financial obligations but also preserve flexibility for growth opportunities. Das
(2022) asserts that the capacity to address temporary financial shortages without disrupting
operations underscores the importance of liquidity as a fundamental tool for resilience in micro
retail environments. By continuously optimizing cash flow and aligning their financial practices
with operational demands, BMBEs demonstrate their ability to sustain competitiveness and
stability in dynamic market conditions.
Leverage. Financial leverage can be used to measure how much capital comes in the form
of debt (loans) or assess the ability of a business to meet its financial obligations (Hayes, 2024).
In addition, leverage is closely related to solvency ratios, as both assess a business’s capacity
to meet its long-term financial obligations. It is used to measure the amount of assets or capital
that is financed by debt (Persada, 2023). Leverage in the financial markets occurs when a
borrower uses borrowed funds to purchase an asset, expecting a larger return than the cost of
the loan itself (Adenugba, et al., 2016). Leverage is the use of borrowed funds to fund MSME
operational and investment activities (Kasmir 2016). Leverage helps MSMEs expand their
business reach, expand their market and drive business growth. From a financial perspective,
leverage is measured by the ratio of debt to equity or total assets (Haque & Varghese, 2021).
Generally, the cost of borrowed money (leverage) is less than the amount of equity. Using the
financial leverage like debts to equity ratio, debts to total assets ratio we can easily identify the
financial position of the firm or the amount of leverage that is used in a firm. Financial leverage
is very curricular for every business in terms of increase in production level, increase the
shareholder value or acquire a new asset. When managing leverage, MSMEs must carefully
weigh the risks and benefits. Too much debt can increase the risk of bankruptcy and debt
dependence, and too little debt can limit business growth. Therefore, it is important for MSMEs
to use leverage wisely and within manageable limits (Nurhayati 2024).
This study examines how BMBEs manage financial leverage—the strategic use of debt—to
balance growth and risk in relation to their marketing strategies and financial performance.
While debt can amplify returns, it also increases financial risk, especially in volatile markets. The
study seeks to understand how these microbusinesses optimize their capital structure to support
both operational and marketing goals.
The use of leverage among BMBEs and other microbusiness enterprises illustrates a
measured approach to debt management, aligning with established financial principles. Many
micro-enterprises prioritize internal financing, relying primarily on personal savings and business
earnings rather than external loans (Persada, 2023; Hayes, 2024). This cautious approach
underscores the balance between pursuing growth and managing financial risks, with borrowing
typically reserved for essential business needs, especially in unpredictable market environments
(Adenugba et al., 2016).
Additionally, Nur Wahyuni & Ak (2022) and Adenugba et al. (2016) highlight that cautious or
conservative debt management is reflected in how BMBEs and microenterprises prioritize
meeting essential operational expenses, such as rent, utilities, and inventory purchases, without
allowing loan obligations to jeopardize these critical costs. Maintaining timely loan payments
without financial strain demonstrates financial discipline and reinforces the study’s
conceptualization of leverage as a tool that supports, rather than jeopardizes, business stability
(Hayes, 2024). Access to credit remains an important contingency, with many BMBEs fostering
strong relationships with lenders (Persada, 2023) and identifying potential loan sources (Hayes,
2024). Informal financial networks, such as personal loans from family or friends, play a vital role
in sustaining liquidity, as discussed by Adenugba et al. (2016). These networks emphasize trust
and financial responsibility, underscored by the prioritization of repaying personal loans
(Persada, 2023). This cultural and social dynamic highlights the significance of informal financial
connections in financial stability, reflecting how they often complement formal financial systems.
Strategic decision-making around leverage is evident in cautious loan selection (Nurhayati,
2024), avoidance of high-interest debt, and reinvestment of profits as an alternative to external
financing (Hayes, 2024). These practices demonstrate the application of the study’s framework
in assessing leverage risks and benefits, showing how BMBEs optimize capital structure to
support sustainable growth while minimizing financial vulnerability.
Collectively, these financial strategies illustrate how BMBEs navigate leverage as both a
growth enabler and a potential risk factor. The balance between internal financing and selective
borrowing reflects the nuanced approach that micro-enterprises take in leveraging debt to
achieve financial stability and business expansion.
Profitability. According to Lenglet (2023), profitability is a metric used to assess a company’s
ability to generate profits from sales, assets, revenue, or its own equity. Profitability is defined as
the ability of a business to generate profit from its economic activity, by using its resources
(Alarussi & Alhaderi, 2018). A study conducted by Kaban (2024) in Universitas Sriwijaya,
Indonesia cited from Sujai, et al. (2022), states that, the higher the company's ability to earn
profits, the greater the return expected by investors. It reflects the outcome of management
policies and decisions over a production period. This study evaluates BMBE profitability using
Return on Assets (ROA) and Return on Equity (ROE), which measure how effectively a
company utilizes its assets and equity to generate profits, serving as key indicators of economic
success.
This study's exploration of the direct link between marketing strategies and profitability is
crucial for BMBEs, as it moves beyond mere promotional activity to demonstrate tangible
financial outcomes. By dissecting how various marketing approaches influence the bottom line,
the study seeks to provide actionable insights for these micro-businesses. Specifically, it will
examine how targeted marketing campaigns, tailored to specific customer segments, can drive
sales volume and revenue growth. This analysis will not only focus on the increase in sales but
also delve into the efficiency of these campaigns. For instance, it will explore how precise
targeting can minimize wasted advertising spend, reducing customer acquisition costs, and
thereby enhancing profitability.
The approach to profitability management among BMBEs and micro-business enterprises
highlights how they implement financial tracking and make informed decisions to achieve
sustainable business growth. Alarussi and Alhaderi (2018) note that many businesses maintain
rigorous tracking of income and expenses through simple but effective tools like notebooks or
mobile applications, allowing them to identify high-profit products and make informed
operational adjustments. This disciplined financial monitoring directly supports the study's focus
on profitability as a measure of effective resource utilization and management decisions. Kaban
(2024) highlights profit reinvestment as a fundamental growth strategy, emphasizing how
successful BMBEs allocate earnings towards business expansion and improvements. This
approach underscores the practical application of profitability as a catalyst for development.
Similarly, consistent year-over-year profit growth among micro-enterprises, as documented by
Alarussi and Alhaderi (2018), reinforces the importance of profitability trends as reliable
indicators of business health and effective management practices. Furthermore, study of Calilat
et al., (2024) highlights that most vendors operate with a very tight capital enough to purchase
their inventory and they lack funds which holds them back to experiment with flexible pricing that
might risk losing sales particularly in a highly competitive market where vendors are highly
sensitive to customer behavior and buyers can easily switch stalls, this limits their ability to
improve their profitability.
Strategic pricing practices play a vital role in maintaining profitability. Kaban (2024)
emphasizes that BMBEs set prices designed not only to cover costs but also to ensure
reasonable profit margins. Regular price adjustments in response to shifting market conditions
further showcase how micro-enterprises effectively manage dynamic profitability.
Complementing these efforts are revenue growth strategies, including the development of new
income streams through product or service diversification, while maintaining a focus on
high-demand items (Alarussi & Alhaderi, 2018). Targeted marketing approaches contribute to
expanding customer bases and boosting sales volumes, exemplifying how these tactics drive
financial growth.
Cost management is another cornerstone of profitability optimization, with the reduction of
unnecessary expenses ensuring that increased revenues directly translate into improved
bottom-line results (Kaban, 2024). Consistently maintaining sales above expense levels, as
highlighted by Alarussi and Alhaderi (2018), demonstrates the effectiveness of profitability
management strategies in micro-retail environments and underscores the link between
operational efficiency and business health.
By integrating strategic pricing, targeted marketing, and rigorous cost management, BMBEs
can thrive in competitive markets despite resource limitations. These practices reflect the
capacity of micro-enterprises to implement sophisticated financial strategies, underscoring the
interconnectedness of marketing activities and financial performance in sustaining business
success.