Managing Small and Medium Enterprises

SMEs are unique and different compared to bigger businesses, especially in the availability of organisational resources, so managing SMEs is different from managing larger businesses (Aragon-Sanchez & Sanchez-Marin 2005; O’Regan & Ghobadiah 2004; Welsh & White 1981). As SMEs grow, they face new problems. The first problem is due to their limited staff: growth means that existing staff must deal with additional workload and new duties brought by the growth. The immediate problem is controlling and managing SMEs as a whole. The second problem is limited access to resources (Welsh & White 1981). For SMEs to grow, they must acquire more resources, yet due to their original smaller size this is not an easy task. The limited resources owned by SMEs lead to limited options in conducting business, limited options in acquiring assets and technology, and limited access to financial assistance such as loans. The third problem relates to their increasing customer numbers: SMEs must dedicate some of their already limited staff and resources to managing their relationship with customers.

These limitations also apply to adopting IT. SMEs have limited options for acquiring IT solutions to support their business. This is due to the limited capital to be invested in IT and the limited internal knowledge to handle the adoption process, operate the acquired IT solutions and maintain the IT resources (Aragon-Sanchez & Sanchez-Marin 2005; Chau 1995; Chen, Chong & Chen 2000; Chesher & Skok 2000; Cragg & King 1993; Levy & Powell 2005; Mako 2005; O’Regan & Ghobadiah 2004).

Due to their limited resources, it is vital for SMEs to consider their IT investment carefully (Gutter & Saleem 2005; Hunter 2004; NOIE 2000). A relatively small percentage of SMEs adopt E-commerce because they cannot see the immediate impact on their business. A conservative approach toward the adoption of IT is necessary since SMEs have to invest a significant proportion of their capital for IT, or any other investment for that matter. One incorrect decision on IT investment could leave SMEs with considerable financial damage and unusable IT components.

Another problem with the adoption of IT within SMEs is caused by lack of resources (e.g. human resources, financial resources, technological resources, etc). SMEs frequently do not have adequate IT knowledge and expertise within their organisation or funds to acquire the knowledge. This can lead to inappropriate adoption of IT or even failure to adopt IT (Al-Gahtani 2004; Chakravorti 2004; Fink 1998; Putranto et al. 2003; Rogoff, Lee & Sub 2004). Failure to acquire appropriate IT solutions can lead to financial problems. In this case, the IT investments can become useless and might become a barrier to doing business. In Indonesia, similar problems exist. Hambali (1990), Putranto (2003), and Sandee and Rietveld (2001) found that one of the factors causing SME failures is a lack of capability to acquire appropriate technology that is important for the business. The failure to adopt appropriate IT might cripple SMEs financially and leave them with systems of limited use.


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