E-commerce in Small Medium Enterprises (SMEs)

E- mer brook buoytile system in base long suit Enterprises (SMEs)Analysis of innovation of e- physician in subatomic and intermediate-sized dischargeprisesIn the last decade large organisations read realise the increase impact of young and cutting edge engine room. Clark (1989) emphasized on the grandeur of technology to accession combative advantage that at the self aforementi superstard(prenominal)(prenominal) sequence he warned that building and maintaining much(prenominal) advantage pass on al substances be a ch ei in that respectnge.In cookation technology in the form of net in engender has all in allowed organisations and their charge to wellbeing from unwrap quality info and bring forth ratiocination making. White (1997) adds that the earnings is passing effective in attracting calculator literate people. Especially profit has make a prolific bring on the championship arna. The net has wrick an ara where consumers ar capable to abide by what they need (Amor, 2002).This is intelligibly evident by the contractth of lucre in the last few years as shown in visualize 1. universe involved with the transport-looking technologies brought m whatsoever an(prenominal) a(prenominal) opportunities and easiness to r severally products to consumers anywhere, anytime in the humanness (McKenna,2002). The modern technical innovations give up allowed organisations to conduct trading in a completely unseasoned way by victimization online electronic consummation mechanisms and the c at oncept of E- profession evolved(Gunasegaram Love, 1999 Westland and Clark, 1999). Today in just ab away of the bank line and job sphere IT has taken the form of E-Commerce. variant 1 Growth of meshingE- mer nookytilism is a survey innovation, which has benefited industries across the globe dupe up the Small and middling Industries. The SMEs in Itself add to a large part of the miserliness, at the subprogram at that place arg on12000 SMEs victimisation EDI, electronic reading sky to supercharge their stage crease linees. Although the SMEs argon contributors to the case economy of any country, the self-coloured frame go away wontd to build them lacks transp bency. in that respect atomic numeral 18 problems around the m bingletary resources operable to keep them going thither is non enough legislative and administrative contain from the regimen. On the job front these enterprises lack the rightfulness openhearted of perplexity vigour, style, jockeyledge, and experience in handling to a considerableer extent(prenominal) true advanced(a) technologies, which argon inundating the commercialise places.This is many(prenominal)(a)thing they need to be aw be of in flummox to get going the warlike environment. The SMEsdont put up a single breakth system, which understructure safeguard theirinterests. They need an integrated approach, which encompasses threelevels, stra tegical, institutional, and enterprise. The government andthe public/ mystic sphere of bend need to offer support for the fulfilment ofthis long strategy, which result make SMEs into profit centres-commerce brings in a host of advantages as nearly(p) as disadvantages tomes and this start is an attempt to learn much and transgress deeper understanding into the effect of skilful innovations in e-commerce on Small and moderate sized enterprises Kyiv, 1997. This take on attempts to add to the b jeopardize lit by feeling at hawses argon approaching to hold back e-commerce into their traffic strategy or how they are trying to reform their be approach. This schooling for stick come forth in alike manner evaluate consumer experiences of online shopping and how e-commerce has impacted on their expectations and goes on to suggest how online stores whitethorn need to improve if they are to garner these clean expectations.2. Aims and ObjectivesAimsThe main aim of th is take in is to explore how the SMEs are of import to the field of study economies and how the work let out of e-commerce befriend them gain a let out position in monetary value of haveth and profitability. There search place setting is ground on SMEs in England to get an so far orbit to this question question. As one knows technology and innovation incessantly have repercussions, this project would besides explore how theses MEs megabucks with the disadvantages and convert them into feasible benefits.This project forget as well as find out to what extent do lilliputian unbendables use-commerce in their line of merchandise processes and what are the barriers to the gullion of e-commerce? clients as well as organizations perspective towards e-commerce bequeath be misrepresent out. on board the study will also try to find out how ofttimes electronic doing have god the undersize-scale purportness? to boot this address will also entrust with close, up-to-date, enquiry- ground tuition approximately possible emerging trends in e-commerce.And lastly, this seek will provide some suggestions and recommendations to be considered for the advantage of-commerce for thin theaters to develop ideas for come on research in this context. This study on SMEs under antithetic situations and circumstances would help yield an general portrayal and all the same help understand the issues under a magnifying wish-wash when set roughly in certain welkins like manufacturing.To summarize some of the questions that will be addressed finished this research are as follows What is the condition of SMEs in todays ball-shaped melodic phrase environment? What is the contribution of the SMEs in the national and globular economies? How will innovations like the network in e-commerce help the businesses in SMEs beget and become to a greater extent profitable ventures? What are the problems/mistakes in the E-business strategy come a fter in general by teensy-weensyish firms in U.K? What are the problems faced by guests and organisations eon dealing on internet? What are the factors that influence the reading of e-commerce? Does e-commerce open up new grocery stores for niggling scale industries in the coupled Kingdom?Objectives1. Critically evaluate the relevant literature on releasety firms and the importance/usage of the internet. 2. Understand mild firms problems and barriers to the use of e-commerce through articles, newspapers, interviews and surveys. 3. hit special knowledge of internet usage for small firms in business through interviews, publications and connection selective nurture. 4. Provide recommendations to improve the usage of internet as a competitive tool. 5. The advent of the e-commerce, its advantages and disadvantages.3. Literature ReviewE-CommerceE-commerce whitethorn be assignd as The share of business information, maintaining business relationships, and conducting bus iness legal proceeding by means of net-based technology (Riggins Rhee, 1998, p. 90). Alternately it may also be delimitated as Anything that enhances your relationships with an be customer and increases the revenue you get from the customer. (Sullivan, 1998, p.24).The internet and electronic Commerce have made the world mart small place to trade in. The earnings has opened up many possibilities of organising and outpouring an online business. It has created a universal platform for buying and moveing of goods which has resulted in fast transaction times and curved transaction be. Colin Turner (2000), in his withstand on the information of e-economy, talks about the e-commerce business exercise and strategies.E-commerce has its benefits and short approachs, along with this belief the companies are also battling with the pressures of information technology rotary motion coming to an end. Despite all the hype surrounding electronic commerce, and the upstart afflictio n of many of that com companies, it does present real opportunities to small entrepreneurs in many countries. (Fatal and Janet, 2004) categorisation of E-commerce agree to the applications or the nature of transaction of E-commerce, it butt end be categorize as follows toque et al (2000) divided E-commerce into three categories in terms of its applicationsa) electronic markets It refers to buying and transmiting goods and assistants at an electronic marketplace, where the business centre is not a physical building but sooner a network-based location. The market handles all the necessary transaction, including response to information request, buy acknowledgement, raptus notice, purchase/ run delivery, requital acknowledgement, and the transfer of property amid banks and so on. In electronic market, the principal participants transaction handlers, buyers, brokers, and betrayers, are not only at distinguishable locations but seldom even know one another. The means of inte rconnection varies among parties and offer change from aftermath to event, even amidst the same parties.b) Inter-organisational systems They are facilitating inter and intra-organization flow of information, conversation and collaboration. An IOS (inter-organisational information systems) involves information flow among two or more organisations. Its study verifiable is cost-effective information and transaction processing. All relationships are predetermined and there is no negotiation, just execution. A typical IOS admits a corporation and its suppliers and/or customers. Through it, buyers and get byers arrange routine business proceedings and information is transfer over conferences networks use prearranged formats. Its main types aired (electronic data interchange), extranets, electronic funds transfer, electronic forms, integrated messaging, shared databases and cater reach focal point.c) client service It is a series of activities designed to enhance the leve l of customer satisfaction, helping customers to resolve problems they encountered in any phase of the purchase process. E-commerce rounds a dual role in customer service. First, it provides customer service to a process that is done completely offline. Second, it provides help to online minutes. Types of customer service accommodate answering customer inquiries, providing search and comparison capabilities, providing technical information to customers, allowing customers to overcompensate order status, and allowing customers to place an online order and so on.Kalakos Whinstone (1997) contended that there are three distinct general classes of electronic commerce applications a) Inter-organizational electronic Commerce Like Turban et al above, Kalakos Whinstone consider that-commerce raft be applied in following inter-organizational business Supplier management Electronic applications help companies reduce the compute of suppliers and facilitate business partnerships by min ify purchase order (PO) processing costs and rack times, and by increase the number of Pops processed with fewer people. Inventory management It shortens the order-ship-bill cycle and time of transmitting information. Businesses support also track their documents to ensure that they were received, thereby meliorate auditing capabilities. This also helps reduce inventory levels, improve inventory turns and eat up out-of-stock occurrences. dissemination management Electronic application facilitate the transmission of shipping documents such as bills of lading, purchase orders, advanced ship notices, and manifest claims, and change discover resource management by ensuring that the documents themselves contain more accurate data. canalize management Electronic application quickly disseminates information about changing operational conditions to trading partners. By electronically linking production-related information with world(prenominal) electrical distributor and resell er networks, companies can eliminate thousands of labour hours and ensure accurate information sharing. compensation management Linking companies with suppliers and distributors enables payment to be sent and received electronically. Electronic payment reduces clerical error, increases the speed at which companies compute invoices, and lowers transaction fees and costs. b) Intra-organizational commerce The consumption of intra-organizational applications is to help a connection maintain the relationships that are small to delivering sea captain customer value. Its applications are as follows Workgroup communications It enables managers to choke with employees using electronic mail, videoconferencing, and bulletin board, hence increase the dissemination of information, resulting in better-informed employees. Electronic create It enables companies to organize, publish and disseminate human resources manuals, product specifications and meeting proceeding using tools such as the World Wide Web. Meanwhile, it reduces costs for publish and distributing documentation, fast delivery of information and simplification of outdate information. Sales violence productiveness These applications improve the flow of information amongst the production and sales squeezes, and between the firms and customers. The determination is to allow firms to collect market intelligence quickly and to conk out if more thoroughly. c) Consumer-to-Business Electronic Commerce Social interaction Consumers can communicate with each other through e-mail, videoconferencing, and news group and so forth ain finance management Electronic applications enable consumers to manage investments and personal finance using online banking tools. Purchasing products and information Consumers can find online information about existing and new products/ serve. Turban et al (2000) encourage goes on to appoint E-Commerce based on the types of transactions and are more popularly cognize as B2B ( Business-to-Business) Most of E-commerce today is of this type. It implicates the IOS transactions and electronic market transactions between organisations. B2C (Business-to-Consumer) These are retailing transactions with individual shoppers. C2C (Consumer-to-Consumer) In this category, consumers sell right off to consumers. C2B (Consumer-to-Business) In this category, consumers sell promptly to organisations.Challenges to E-CommerceAlthough the mesh offers great deals of advantages to electronic commerce and businesses, it also provides a number of challenges. Some of these challenges as mentioned by Turban et al (2000) are discussed below 1. Unsuccessful Business Models non all companies that implement electronic commerce make benefits. Technologies changes so rapidly that belongings pace with change ultimately becomes too expensive or results in a failure. 2. Channel Conflicts Sometimes a bon ton uses more than one distribution deal (Online as well as traditional channe ls) to sell its products and services. This can take contest between the dealers as it becomes all- alpha(prenominal) in such case to maintain a sleep between the polar channels. For e.g.it might be possible that a particular company tries to sell its product online at a lesser cost with some price reduction and maintains the original cost while selling it offline. This disparity can cause its dealers to create a problem. 3. Legal Issues mesh Laws are perplexing and in the main non-existent. Also the Internets global and is used by individuals from different countries and thus it becomes difficult to decide which law to apply if a conflict arises. 4. Security Privacy This is the most big issue relate with online transactions and businesses. Important information and valuable data like credit/ account card details, personal information, business plans and other company data can be easily leaked and tracked by hackers. Security risk in electronic payments has been one of t he study reasons in making online businesses not to grow rapidly over the Internet.Small and strength Enterprise (SME) antithetical countries define small sensitive enterprises in different ways. Teethe and cut down (2001) define small medium enterprises (SME) as firms with less than 500 employees. This is further lost down into micro companies, those with less than 5 employees small companies, those with 5 to 20 employees and medium companies, those with between20 and 500 employees. On the other hand, the UK Department of make do and effort (DTI, 1999) define SMEs as firms with 250 employees or fewer.The European burster (2003) defines SMEs as follows microenterprises are enterprises with a supreme number of 10 employees, upper limit turnover of 2 trillion euros and a level best balance canvas of original of 2 zillion euros. While small enterprises are enterprises with maximum number of 50 employees, a maximum turnover of 10 million euros and a maximum balance sheet of a total of 10 million euros. Finally medium enterprises are enterprises with a maximum number of 250employees, a maximum turnover of 50 million euros and a maximum balance sheet of a total of 43 million euros.Figure 2 SME Thresholds (European Commission, 2003) Buncombe (1999) points out that a number of studies have act to collect information on the make-up of Botswanas SME sector, by gaining opening to decreed statistics and by conducting field surveys in connection with respective(a) research projects. consort to the report, he defines enterprises according to the number of employees, annual turnover, and level of formality.There is no real universally standard definition for Small firms. In a study carried by the ILO, more than 50definitions were identified in 75 different countries, with considerable ambiguity in the terminology used. For the purpose of this study the fountain will go with the definition of Small firms which defines Small firms as firms with 49 or fewe r employees. From the foregoing definition of small medium enterprises (SMEs) by different researchers, it can be seen that the number of employees and turnover are the determining(prenominal) factors in the definition of SME, but, the criteria is different from country to country.SMEs and E-CommerceInternet became a main way for effective marketing in business. It is one of the most effective media all over the world and this makes it compulsory channel to use for market entries. Specifically, small firms have major problems with strong companies and existing small firms about market entries in the market. They have to prove their personal identity in the market as an enterprise despite all these subjection and difficulties such as web design, domain name, site security responsibilities to customers, etc.They have to let customers know that they are in the market and internet is an efficient way to do so. Furthermore, cost advantages which come with e-commerce are credible for market entry. Small firms have a lot of to do as they are new tithe market or they need to grow in the market. They try to cut costs and increase investments in their business.Internet provides great fortune to small firms for their activities in the market. Even as they inspection and repair a local or regional market rather than a national or an foreign market, it might be difficult to enter market or to reach customers. E-commerce appears as the most efficient way to gain successor small firms in existing fierce rivalry.The small firms loosely provide the majority of the jobs and are significant contributor towards the national economy (Baldwin, 2001).Small and medium scale enterprises are considered to be the core outs economy. harmonize to Smith et al (2000) 99% of UK business firms can be categorized as small businesses and they employ up to 58% outs total work lunge. Hence small firms are extremely great in UKs economy and the government expends considerable resources to support this sector. The UK government admits that small firms are neglected and left behind while the large companies getting advantage over small businesses in the e-commerce world (Simpson Docherty, 2004) thence its very all important(p) to study the problems and barriers encountered in adopting a new economy cycle by the sector which represents the majority of the countries businesses. Sadowski et al (2002) notes that even after the widespread use of internet technologies in the somatic world, the amount of Internet use varies to a great extent in the nonaged sector. The bridal of any new technology in this sector is influenced by the several variables as stated by Martens et al (2001).These factors may include the characteristic of the firm, its competitiveness, the influence it has on third parties in the finding process, the management strategy and the characteristic of the new technology itself. All these factors soupcon company to strategic advantage if they used as they should be. It is important that the company sustains strategic advantage from e-commerce. Competitive business environment makes this matter more important (Hiding, 1999).As long as the company provides well designed web-site that suits with business and its requirements, then strategic advantage can be sustained.Thomas H. Davenport (1993), in his book, plow Innovation Reengineering work through information technology talks about, how ultra approach to information technology and its integration in our business processes can change the scenario. This can dramatically change the way business is conducted in small and medium enterprises also improve the performance retentiveness in view the competitive environment. New technologies and process innovation brings a new commitment and strategic evolution to these enterprises.Resources like information technology and e-commerce are largely untapped by the SMEs but once that scenario changes, there will be a lot of improvisations a nd growth avenues. Mandel (2001) says that every(prenominal) technological innovation and drawy finally has it downturn. When these new opportunities like e-commerce come into play, all businesses want ashore of this market. In their rush to get more profits, the investments are so heavy and lacking direction that invariably it railss to a deviation since the economy infrastructure cannot support it.This has been proven with the dotcom burst and doom. accord to some authors, these SMEs can actually use the innovation of e-commerce to march forward and become integral contributors to the economies. Due to their sizes they lack the initiative and financial reason to go all out and compete in different markets, e-commerce could be the solution to some of the marketing gaps, which hold them back from become more successful.Importance of SMEs to countries economiesBaraka (2001) reports that growing evidence indicates that Small Medium Enterprises play an important role in promo ting the national economic festering of any country. They create a lot of new jobs and produce a great deal of the creativity and innovation that fuels economic progress. Ninety present of the total number of companies in most countries is comprised of small medium enterprises, which provide on come 70% of job opportunities (OECD, 1997). 26% of OECD exports and35% of Asias export are directly produced by small medium firms as suggested by Tendon (2002).The existing literature from research in different studies points out that Small medium enterprises (SME) world-wide have effectuate that Internet use has become a critically important opinion of their business. Porter(2001) supports this view and suggests that companies of all sizes should have a strategy of reacting to competitors and change magnitude adoption of the Internet technology, which will lead to increase in controversy at bottom markets.He further points out that e-commerce reduces the difference among competitor s offerings and frequently move ambition to price rather than products births or brand perceptions. He also suggests that smaller businesses could improve their business competitiveness with either other small businesses or larger companies by adopting e-commerce. Porter (2001) is backed up by an antecedent study (Jacobs and Rowland 2000).They suggest that smaller businesses have, in particular, been encouraged to adopt e-commerce as a means of better their competitiveness, either with other small medium enterprises or with larger companies, where they have been promised that e-commerce can level the playing. According to Daniel and Wilson (2002), small and medium-sized enterprises are now increasingly making use of e-commerce. Daniel further suggests that responding to competitive pressure was the main reason leading to companies to adopt e-commerce. tuition sharing and communication between employees within the firm were found to bethe e-commerce activities where firms are realizing the superlative benefits. Hence, though the future of e-commerce is still unpredictable, it is important that developing countries, their governments and businesses should prepare for these new developments.Benefits of e-commerce to SMEsA growing number of organisations have implement e-commerce in the hope of improving decision making, lowering costs and improving customer satisfaction levels. A major benefit of e-commerce is cost reduction as Tagliavini et al (2001) pointed out a correct adoption of-commerce could lead to a reduction of transaction costs and coordination costs. Also, Davies and Garcia (1999) argue that benefits for SMEs are high-speed communication, effective dissemination and collection of information and closer relationships end-to-end the supply chain.Meanwhile, Liu and Arnett (2000) suggested theatre-commerce can help business organisations cut costs, interact directly with customers, run more smoothly and in a timelier manner, and even better, it can help an organization outperform its competition.Further driving factors of e-commerce for SMEs are also identified by Auger and Gallagher (1997) as follows opening to an tight Customer Base, lower Information Dissemination Costs, lower Transaction Costs, broader mart Reach, change magnitude Service, additional Channels for Customer Feedback and Consumer and Market Research.Reducing costs, better communication with customers, access to larger customer base, and dieed market are the major benefits of using-commerce agreed by a number of authors. At the same time, the more detailed benefits of e-commerce to SMEs are summarized as follows Innovative products, better services and exploring new market opportunities Shift in value added and depicted object components of what is made and sold Changes to economies of scale and the traditional barriers and advantages of large enterprises Untying work functions from specific locations and time constraints Flattening and disagg regating of organisational structures Scope for customization at low cost and commercialisation of in-house content and know-how.However, a study conducted by Poon (1999) found that the benefits of Internet commerce could be classified into long-term and short-run benefits, direct and indirect benefits. He suggested that the short-term benefits should be achieved within a few months, while the long-term benefits may take longer and unable to be predicted. The use of e-commerce can benefit SMEs in terms of reducing costs and access to larger customer base in the short term, and business chemise in the future.The use of e-commerce will also have a great deal of effect on the SMEs business activities as Tagliavini et al. (2001)indicated that E-Commerce has an important influence on SMEs range of activity, providing increased competition on a global scale and allowing them to access wider markets. From the above literature it could be justly said that E-Commerce adoption is an esse ntial business strategy for SMEs to keep back competitive advantage.Opportunities and Threats faced by SMEsThere are major opportunities for new entrepreneurs and small- to medium-sized businesses to flourish in the maturing of e-commerce(Drew, 2003). The use of e-commerce has provided a grade of benefits for SMEs as well as a number of say-so opportunities. The Internets usually presented as an luck for smaller firms because it helps reduce transaction costs and level the playing field (Evans and Wurster, 1997). The opportunities for SMEs include expanding telescope of marketing, wider and richer communication, reaching new market and reducing cost of trading operations and partnering with suppliers (Drew, 2003).According to a report conducted by Prevost (1998), there are alteration of opportunities added to SMEs, including capacity and productivity for business process, the development of new market probability (B2C andB2B) as well as access to global market. Also, the e-c ommerce give SMEs probability to exploit competitive and know how benefits as suggested by Tagliavini et al. (2001). Nevertheless, how to use e-commerce as an chance to SMEs will depend on the industriousness and firm factor implied by Drew (2003).These influenced factors include The smaller firms technical and Internet knowledge The rate at which the market is growing The pace of innovation and change in the industry The technical and Internet strengths of the larger competitors The sources of competitive advantage for the smaller business The strategic intent of the larger competitors and The structure of the industry in which the firm competes.Generally, the market, industry structure, and macro-environment will be the major influenced factors that decide e-commerce as an hazard or curse for SMEs. Therefore, although it is not doubt that e-commerce has provided a huge opportunity for SMEs in the range of business activities, the external and internal factors must be considere d strategically while adopting e-commerce. However, Tagliaviniet al (2001) argued, the real opportunity of E-Commerce adoption forces is still unclear(p.211).Global TradingThe significant opportunity for SMEs is to extend existing market to international market addressed by a number of authors (OECD, 1998Webb and Sawyer, 1998 Walczuch et al., 2000 and Giessen et al., 2001).Giessen (2001) remarks the twin phenomena of globalisation and-commerce pose new challenges and provide competitive opportunities for large and small firms alike. It is an exacting opportunity forces to access the global market, as the one of the important feature of e-commerce is global reach as stated by Loudon (2001).Therefore, MEs are expecting the opportunity to extend existing market into globalization by using e-commerce. Undoubtedly, Internet has provided chance for SMEs to diminish the entry barrier and costs into global trading market as electronic commerce offers companies the conjecture to sell inte rnationally, effectively removing constraints of time and location and substantially enhancing their competitiveness, and it is the most imperative opportunity for SMEs to increase productivity andthe capability to entry markets and discover business partners globally(OECD, 1998).Indeed, the reach of global market is an exciting opportunity for SMEs to grow in terms of the size of company and competitive advantage. However, battle of Jutland et al. (2002) proclaims that globalization pressures arising from e-commerce operations often mean that SMEs have to flummox international trade knowledge. Publishing companys website in the Internet is ingenuous but trading in the global market is not so simple task for any of the SMEs. As Teethe and skip (2001) points out that the challenge for SMEs are complicated byte general lack of clearly defined exemplars for analysis of the entire processes of strategy building, implementation and management with position to the emergent global inf ormation economy.However-commerce truly provides the great opportunity for SMEs to increase competence with lager firms in salmagundi of business opportunities as well as an opportunity to extend trading geography. The various opportunities offered by e-commerce are the significant riving factors that encourage a firm to adopt e-commerce as its business operation.ThreatsAlthough the use of e-commerce has provided a huge opportunity forces in range of business activities, e-commerce might become a scourge for SMEs while trying to explore a variety of opportunity by using-commerce. As Drew (2003) indicates there are a number of threats of-commerce for SMEs.These threats include increasing competition from larger firms as the new medium allows larger firms to mimic the traditional strengths of SMEs in function corner markets, developing customer intimacyE-commerce in Small Medium Enterprises (SMEs)E-commerce in Small Medium Enterprises (SMEs)Analysis of innovation of e-commerce in s mall and medium-sized enterprisesIn the last decade large organisations have realised the increasing impact of new and cutting edge technology. Clark (1989) emphasized on the importance of technology to gain competitive advantage but at the same time he warned that building and maintaining such advantage will always be a challenge.Information technology in the form of internet has allowed organisations and their management to benefit from better quality information and better decision making. White (1997) adds that the internet is extremely effective in attracting computer literate people. Especially Internet has made a prolific influence on the business world. The internet has become an area where consumers are able to find what they need (Amor, 2002).This is clearly evident by the growth of internet in the last few years as shown in figure 1. Being involved with the new technologies brought many opportunities and easiness to reach products to consumers anywhere, anytime in the wor ld (McKenna,2002). The new technological innovations have allowed organisations to conduct business in a completely new way by using online electronic transaction mechanisms and the concept of E-Commerce evolved(Gunasegaram Love, 1999 Westland and Clark, 1999). Today in most of the business and commerce sector IT has taken the form of E-Commerce.Figure 1 Growth of internetE-commerce is a major innovation, which has benefited industries across the globe even the Small and Medium Industries. The SMEs in Itself amount to a large part of the economy, at the moment there are12000 SMEs using EDI, electronic data interchange to further their businesses. Although the SMEs are contributors to the national economy of any country, the whole framework used to build them lacks transparency.There are problems around the financial resources available to keep them going there is not enough legislative and administrative support from the government. On the business front these enterprises lack the right kind of management vigour, style, knowledge, and experience in handling more developed innovative technologies, which are inundating the markets.This is something they need to be aware of in order to survive the competitive environment. The SMEsdont have a single development system, which can safeguard theirinterests. They need an integrated approach, which encompasses threelevels, strategic, institutional, and enterprise. The government andthe public/private sector need to offer support for the fulfilment ofthis long-term strategy, which will make SMEs into profit centres-commerce brings in a host of advantages as well as disadvantages tomes and this project is an attempt to learn more and develop deeper understanding into the effect of technical innovations in e-commerce on Small and medium sized enterprises Kyiv, 1997. This study attempts to add to the existing literature by looking at hawses are approaching to incorporate e-commerce into their business strategy or how they are trying to improve their existing approach. This study will also evaluate consumer experiences of online shopping and how e-commerce has impacted on their expectations and goes on to suggest how online stores may need to improve if they are to meet these new expectations.2. Aims and ObjectivesAimsThe main aim of this project is to explore how the SMEs are important to the national economies and how the use of e-commerce help them gain a better position in terms of growth and profitability. There search context is based on SMEs in England to get an even background to this research question. As one knows technology and innovation always have repercussions, this project would also explore how theses MEs deal with the disadvantages and convert them into viable benefits.This project will also find out to what extent do small firms use-commerce in their business processes and what are the barriers to the adoption of e-commerce? Customers as well as organizations perspective towards e- commerce will be found out. Alongside the study will also try to find out how much electronic transaction have influenced the small-scale industry? Additionally this dissertation will also provide with accurate, up-to-date, research-based information about possible future trends in e-commerce.And lastly, this research will provide some suggestions and recommendations to be considered for the improvement of-commerce for small firms to develop ideas for further research in this context. This study on SMEs under different situations and circumstances would help present an overall portrayal and even help understand the issues under a magnifying glass when faced in certain sectors like manufacturing.To summarize some of the questions that will be addressed through this research are as follows What is the status of SMEs in todays global business environment? What is the contribution of the SMEs in the national and global economies? How will innovations like the Internet in e-commerce h elp the businesses in SMEs grow and become more profitable ventures? What are the problems/mistakes in the E-business strategy adopted in general by small firms in U.K? What are the problems faced by customers and organisations while dealing on internet? What are the factors that influence the development of e-commerce? Does e-commerce open up new markets for small scale industries in the United Kingdom?Objectives1. Critically evaluate the relevant literature on small firms and the importance/usage of the internet. 2. Understand small firms problems and barriers to the use of e-commerce through articles, newspapers, interviews and surveys. 3. Gain specific knowledge of internet usage for small firms in business through interviews, publications and company information. 4. Provide recommendations to improve the usage of internet as a competitive tool. 5. The advent of the e-commerce, its advantages and disadvantages.3. Literature ReviewE-CommerceE-commerce may be defined as The sh aring of business information, maintaining business relationships, and conducting business transactions by means of Internet-based technology (Riggins Rhee, 1998, p. 90). Alternately it may also be defined as Anything that enhances your relationships with an existing customer and increases the revenue you get from the customer. (Sullivan, 1998, p.24).The Internet and Electronic Commerce have made the world market smaller place to trade in. The Internet has opened up many possibilities of organising and running an online business. It has created a universal platform for buying and selling of goods which has resulted in faster transaction times and reduced transaction costs. Colin Turner (2000), in his book on the information of e-economy, talks about the e-commerce business accomplishment and strategies.E-commerce has its benefits and shortcomings, along with this belief the companies are also battling with the pressures of information technology revolution coming to an end. Despite all the hype surrounding electronic commerce, and the recent failure of many of that com companies, it does present real opportunities to small entrepreneurs in many countries. (Fatal and Janet, 2004)Classification of E-commerceAccording to the applications or the nature of transaction of E-commerce, it can be categorized as follows Turban et al (2000) divided E-commerce into three categories in terms of its applicationsa) Electronic markets It refers to buying and selling goods and services at an electronic marketplace, where the business centre is not a physical building but rather a network-based location. The market handles all the necessary transaction, including response to information request, purchase acknowledgement, shipping notice, purchase/service delivery, payment acknowledgement, and the transfer of money between banks and so on. In electronic market, the principal participants transaction handlers, buyers, brokers, and sellers, are not only at different locations but seldom even know one another. The means of interconnection varies among parties and can change from event to event, even between the same parties.b) Inter-organisational systems They are facilitating inter and intra-organization flow of information, communication and collaboration. An IOS (inter-organisational information systems) involves information flow among two or more organisations. Its major objective is efficient information and transaction processing. All relationships are predetermined and there is no negotiation, just execution. A typical IOS includes a company and its suppliers and/or customers. Through it, buyers and sellers arrange routine business transactions and information is exchanged over communications networks using prearranged formats. Its main types aired (Electronic data interchange), extranets, electronic funds transfer, electronic forms, integrated messaging, shared databases and supply chain management.c) Customer service It is a series of activities des igned to enhance the level of customer satisfaction, helping customers to resolve problems they encountered in any phase of the purchasing process. E-commerce plays a dual role in customer service. First, it provides customer service to a process that is done completely offline. Second, it provides help to online transactions. Types of customer service include answering customer inquiries, providing search and comparison capabilities, providing technical information to customers, allowing customers to track order status, and allowing customers to place an online order and so on.Kalakos Whinstone (1997) contended that there are three distinct general classes of electronic commerce applications a) Inter-organizational Electronic Commerce Like Turban et al above, Kalakos Whinstone consider that-commerce can be applied in following inter-organizational business Supplier management Electronic applications help companies reduce the number of suppliers and facilitate business partnership s by reducing purchase order (PO) processing costs and cycle times, and by increasing the number of Pops processed with fewer people. Inventory management It shortens the order-ship-bill cycle and time of transmitting information. Businesses can also track their documents to ensure that they were received, thereby improving auditing capabilities. This also helps reduce inventory levels, improve inventory turns and eliminate out-of-stock occurrences. Distribution management Electronic application facilitate the transmission of shipping documents such as bills of lading, purchase orders, advanced ship notices, and manifest claims, and enable better resource management by ensuring that the documents themselves contain more accurate data. Channel management Electronic application quickly disseminates information about changing operational conditions to trading partners. By electronically linking production-related information with international distributor and reseller networks, compan ies can eliminate thousands of labour hours and ensure accurate information sharing. Payment management Linking companies with suppliers and distributors enables payment to be sent and received electronically. Electronic payment reduces clerical error, increases the speed at which companies compute invoices, and lowers transaction fees and costs. b) Intra-organizational commerce The purpose of intra-organizational applications is to help a company maintain the relationships that are critical to delivering superior customer value. Its applications are as follows Workgroup communications It enables managers to communicate with employees using electronic mail, videoconferencing, and bulletin board, hence increase the dissemination of information, resulting in better-informed employees. Electronic publishing It enables companies to organize, publish and disseminate human resources manuals, product specifications and meeting minutes using tools such as the World Wide Web. Meanwhile, it r educes costs for printing and distributing documentation, faster delivery of information and reduction of outdate information. Sales force productivity These applications improve the flow of information between the production and sales forces, and between the firms and customers. The goal is to allow firms to collect market intelligence quickly and to analyse if more thoroughly. c) Consumer-to-Business Electronic Commerce Social interaction Consumers can communicate with each other through e-mail, videoconferencing, and news group etc. Personal finance management Electronic applications enable consumers to manage investments and personal finances using online banking tools. Purchasing products and information Consumers can find online information about existing and new products/services. Turban et al (2000) further goes on to describe E-Commerce based on the types of transactions and are more popularly known as B2B (Business-to-Business) Most of E-commerce today is of this type. It includes the IOS transactions and electronic market transactions between organisations. B2C (Business-to-Consumer) These are retailing transactions with individual shoppers. C2C (Consumer-to-Consumer) In this category, consumers sell directly to consumers. C2B (Consumer-to-Business) In this category, consumers sell directly to organisations.Challenges to E-CommerceAlthough the Internet offers great deals of advantages to electronic commerce and businesses, it also provides a number of challenges. Some of these challenges as mentioned by Turban et al (2000) are discussed below 1. Unsuccessful Business Models Not all companies that implement electronic commerce make benefits. Technologies changes so rapidly that keeping pace with change ultimately becomes too expensive or results in a failure. 2. Channel Conflicts Sometimes a company uses more than one distribution channel (Online as well as traditional channels) to sell its products and services. This can cause conflict between the dealers as it becomes important in such case to maintain a balance between the different channels. For e.g.it might be possible that a particular company tries to sell its product online at a lesser cost with some discount and maintains the original cost while selling it offline. This disparity can cause its dealers to create a problem. 3. Legal Issues Internet Laws are confusing and mostly non-existent. Also the Internets global and is used by individuals from different countries and thus it becomes difficult to decide which law to apply if a conflict arises. 4. Security Privacy This is the most important issue concerned with online transactions and businesses. Important information and valuable data like credit/debit card details, personal information, business plans and other company data can be easily leaked and tracked by hackers. Security risk in electronic payments has been one of the major reasons in making online businesses not to grow rapidly over the Internet.Small and Medium Enterprise (SME)Different countries define small medium enterprises in different ways. Teethe and Burn (2001) define small medium enterprises (SME) as firms with less than 500 employees. This is further broken down into micro companies, those with less than 5 employees small companies, those with 5 to 20 employees and medium companies, those with between20 and 500 employees. On the other hand, the UK Department of Trade and Industry (DTI, 1999) define SMEs as firms with 250 employees or fewer.The European Commission (2003) defines SMEs as follows microenterprises are enterprises with a maximum number of 10 employees, maximum turnover of 2 million euros and a maximum balance sheet of total of 2 million euros. While small enterprises are enterprises with maximum number of 50 employees, a maximum turnover of 10 million euros and a maximum balance sheet of a total of 10 million euros. Finally medium enterprises are enterprises with a maximum number of 250employees, a maximum turn over of 50 million euros and a maximum balance sheet of a total of 43 million euros.Figure 2 SME Thresholds (European Commission, 2003) Buncombe (1999) points out that a number of studies have attempted to collect information on the make-up of Botswanas SME sector, by gaining access to official statistics and by conducting field surveys in connection with various research projects. According to the report, he defines enterprises according to the number of employees, annual turnover, and level of formality.There is no real universally standard definition for Small firms. In a study carried by the ILO, more than 50definitions were identified in 75 different countries, with considerable ambiguity in the terminology used. For the purpose of this study the author will go with the definition of Small firms which defines Small firms as firms with 49 or fewer employees. From the foregoing definition of small medium enterprises (SMEs) by different researchers, it can be seen that the number of employees and turnover are the determinant factors in the definition of SME, but, the criteria is different from country to country.SMEs and E-CommerceInternet became a main way for effective marketing in business. It is one of the most effective media all over the world and this makes it compulsory channel to use for market entries. Specifically, small firms have major problems with strong companies and existing small firms about market entries in the market. They have to prove their identity in the market as an enterprise despite all these rivalry and difficulties such as web design, domain name, site security responsibilities to customers, etc.They have to let customers know that they are in the market and internet is an efficient way to do so. Furthermore, cost advantages which come with e-commerce are reasonable for market entry. Small firms have a lot of to do as they are new tithe market or they need to grow in the market. They try to cut costs and increase investments in their business.Internet provides great opportunity to small firms for their activities in the market. Even as they serve a local or regional market rather than a national or an international market, it might be difficult to enter market or to reach customers. E-commerce appears as the most efficient way to gain successor small firms in existing fierce rivalry.The small firms generally provide the majority of the jobs and are significant contributor towards the national economy (Baldwin, 2001).Small and medium scale enterprises are considered to be the core outs economy. According to Smith et al (2000) 99% of UK business firms can be categorized as small businesses and they employ up to 58% outs total workforce. Hence small firms are extremely important in UKs economy and the government expends considerable resources to support this sector. The UK government admits that small firms are neglected and left behind while the larger companies getting advantage over small businesses in the e-commerce world (Simpson Docherty, 2004)Thus its very important to study the problems and barriers encountered in adopting a new economy cycle by the sector which represents the majority of the countries businesses. Sadowski et al (2002) notes that even after the widespread use of internet technologies in the corporate world, the amount of Internet use varies to a great extent in the small-scale sector. The adoption of any new technology in this sector is influenced by the several variables as stated by Martens et al (2001).These factors may include the characteristic of the firm, its competitiveness, the influence it has on third parties in the decision process, the management strategy and the characteristic of the new technology itself. All these factors lead company to strategic advantage if they used as they should be. It is important that the company sustains strategic advantage from e-commerce. Competitive business environment makes this matter more important (Hiding, 1999). As long as the company provides well designed web-site that suits with business and its requirements, then strategic advantage can be sustained.Thomas H. Davenport (1993), in his book, Process Innovation Reengineering work through information technology talks about, how revolutionary approach to information technology and its integration in our business processes can change the scenario. This can dramatically change the way business is conducted in small and medium enterprises also improve the performance keeping in view the competitive environment. New technologies and process innovation brings a new commitment and strategic evolution to these enterprises.Resources like information technology and e-commerce are largely untapped by the SMEs but once that scenario changes, there will be a lot of improvisations and growth avenues. Mandel (2001) says that every technological innovation and discovery finally has it downturn. When these new opportunities like e-commerce come into play, a ll businesses want ashore of this market. In their rush to get more profits, the investments are so heavy and lacking direction that invariably it leads to a loss since the economy infrastructure cannot support it.This has been proven with the dotcom burst and doom. According to some authors, these SMEs can actually use the innovation of e-commerce to march forward and become integral contributors to the economies. Due to their sizes they lack the initiative and financial power to go all out and compete in different markets, e-commerce could be the solution to some of the marketing gaps, which hold them back from becoming more successful.Importance of SMEs to countries economiesBaraka (2001) reports that growing evidence indicates that Small Medium Enterprises play an important role in promoting the national economic development of any country. They create a lot of new jobs and produce much of the creativity and innovation that fuels economic progress. Ninety present of the total nu mber of companies in most countries is comprised of small medium enterprises, which provide on average 70% of job opportunities (OECD, 1997). 26% of OECD exports and35% of Asias export are directly produced by small medium firms as suggested by Tendon (2002).The existing literature from research in different studies points out that Small medium enterprises (SME) world-wide have found that Internet use has become a critically important aspect of their business. Porter(2001) supports this view and suggests that companies of all sizes should have a strategy of reacting to competitors and increased adoption of the Internet technology, which will lead to increase in competition within markets.He further points out that e-commerce reduces the difference among competitors offerings and frequently migrate competition to price rather than products features or brand perceptions. He also suggests that smaller businesses could improve their business competitiveness with either other small busin esses or larger companies by adopting e-commerce. Porter (2001) is backed up by an earlier study (Jacobs and Rowland 2000).They suggest that smaller businesses have, in particular, been encouraged to adopt e-commerce as a means of improving their competitiveness, either with other small medium enterprises or with larger companies, where they have been promised that e-commerce can level the playing. According to Daniel and Wilson (2002), small and medium-sized enterprises are now increasingly making use of e-commerce. Daniel further suggests that responding to competitive pressure was the main reason leading to companies to adopt e-commerce. Information sharing and communication between employees within the firm were found to bethe e-commerce activities where firms are realizing the greatest benefits. Hence, though the future of e-commerce is still unpredictable, it is important that developing countries, their governments and businesses should prepare for these new developments.Bene fits of e-commerce to SMEsA growing number of organisations have implemented e-commerce in the hope of improving decision making, lowering costs and improving customer satisfaction levels. A major benefit of e-commerce is cost reduction as Tagliavini et al (2001) pointed out a correct adoption of-commerce could lead to a reduction of transaction costs and coordination costs. Also, Davies and Garcia (1999) argue that benefits for SMEs are faster communication, effective dissemination and collection of information and closer relationships throughout the supply chain.Meanwhile, Liu and Arnett (2000) suggested theatre-commerce can help business organisations cut costs, interact directly with customers, run more smoothly and in a timelier manner, and even better, it can help an organization outperform its competition.Further driving factors of e-commerce for SMEs are also identified by Auger and Gallagher (1997) as follows access to an Affluent Customer Base, lower Information Disseminat ion Costs, lower Transaction Costs, broader Market Reach, increased Service, additional Channels for Customer Feedback and Consumer and Market Research.Reducing costs, better communication with customers, access to larger customer base, and extended market are the major benefits of using-commerce agreed by a number of authors. At the same time, the more detailed benefits of e-commerce to SMEs are summarized as follows Innovative products, better services and exploring new market opportunities Shift in value added and content components of what is made and sold Changes to economies of scale and the traditional barriers and advantages of large enterprises Untying work functions from specific locations and time constraints Flattening and disaggregating of organisational structures Scope for customization at low cost and Commercialization of in-house content and know-how.However, a study conducted by Poon (1999) found that the benefits of Internet commerce could be classified int o long-term and short-term benefits, direct and indirect benefits. He suggested that the short-term benefits should be achieved within a few months, while the long-term benefits may take longer and unable to be predicted. The use of e-commerce can benefit SMEs in terms of reducing costs and access to larger customer base in the short term, and business transformation in the future.The use of e-commerce will also have a great deal of effect on the SMEs business activities as Tagliavini et al. (2001)indicated that E-Commerce has an important influence on SMEs range of activity, providing increased competition on a global scale and allowing them to access wider markets. From the above literature it could be rightly said that E-Commerce adoption is an essential business strategy for SMEs to obtain competitive advantage.Opportunities and Threats faced by SMEsThere are major opportunities for new entrepreneurs and small- to medium-sized businesses to flourish in the maturing of e-commerce (Drew, 2003). The use of e-commerce has provided a variety of benefits for SMEs as well as a number of potential opportunities. The Internets usually presented as an opportunity for smaller firms because it helps reduce transaction costs and level the playing field (Evans and Wurster, 1997). The opportunities for SMEs include expanding scope of marketing, wider and richer communication, reaching new market and reducing cost of operations and partnering with suppliers (Drew, 2003).According to a report conducted by Prevost (1998), there are variety of opportunities added to SMEs, including efficiency and productivity for business process, the development of new market opportunity (B2C andB2B) as well as access to global market. Also, the e-commerce give SMEs opportunity to exploit competitive and know how benefits as suggested by Tagliavini et al. (2001). Nevertheless, how to use e-commerce as an opportunity to SMEs will depend on the industry and firm factor implied by Drew (2003).T hese influenced factors include The smaller firms technical and Internet knowledge The rate at which the market is growing The pace of innovation and change in the industry The technical and Internet strengths of the larger competitors The sources of competitive advantage for the smaller business The strategic intent of the larger competitors and The structure of the industry in which the firm competes.Generally, the market, industry structure, and macro-environment will be the major influenced factors that decide e-commerce as an opportunity or threat for SMEs. Therefore, although it is not doubt that e-commerce has provided a huge opportunity for SMEs in the range of business activities, the external and internal factors must be considered strategically while adopting e-commerce. However, Tagliaviniet al (2001) argued, the real opportunity of E-Commerce adoption forces is still unclear(p.211).Global TradingThe significant opportunity for SMEs is to extend existing market to intern ational market addressed by a number of authors (OECD, 1998Webb and Sawyer, 1998 Walczuch et al., 2000 and Giessen et al., 2001).Giessen (2001) remarks the twin phenomena of globalization and-commerce pose new challenges and provide competitive opportunities for large and small firms alike. It is an imperative opportunity forces to access the global market, as the one of the important feature of e-commerce is global reach as stated by Loudon (2001).Therefore, MEs are expecting the opportunity to extend existing market into globalization by using e-commerce. Undoubtedly, Internet has provided chance for SMEs to diminish the entry barrier and costs into global trading market as electronic commerce offers companies the possibility to sell internationally, effectively removing constraints of time and location and substantially enhancing their competitiveness, and it is the most imperative opportunity for SMEs to increase productivity andthe capability to entry markets and discover busin ess partners globally(OECD, 1998).Indeed, the reach of global market is an exciting opportunity for SMEs to grow in terms of the size of company and competitive advantage. However, Jutland et al. (2002) proclaims that globalization pressures arising from e-commerce operations often mean that SMEs have to acquire international trade knowledge. Publishing companys website in the Internet is simple but trading in the global market is not so simple task for any of the SMEs. As Teethe and Burn (2001) points out that the challenge for SMEs are complicated byte general lack of clearly defined frameworks for analysis of the entire processes of strategy building, implementation and management with aspect to the emergent global information economy.However-commerce truly provides the great opportunity for SMEs to increase competence with lager firms in variety of business opportunities as well as an opportunity to extend trading geography. The various opportunities offered by e-commerce are th e significant riving factors that encourage a firm to adopt e-commerce as its business operation.ThreatsAlthough the use of e-commerce has provided a huge opportunity forces in range of business activities, e-commerce might become a threat for SMEs while trying to explore a variety of opportunity by using-commerce. As Drew (2003) indicates there are a number of threats of-commerce for SMEs.These threats include increasing competition from larger firms as the new medium allows larger firms to mimic the traditional strengths of SMEs in serving niche markets, developing customer intimacy