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 et.al. (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.

References

Al-Gahtani, S.S. 2004, ‘Computer Technology Acceptance Success Factors in Saudi Arabia: An Exploratory Study’, Journal of Global Information Technology Management, vol. 7, no. 1, pp. 5-29.

Aragon-Sanchez, A. & Sanchez-Marin, G. 2005, ‘Strategic Orientation, Management Characteristics, and Performance: A Study of Spanish SMEs’, Journal of Small Business Management, vol. 43, no. 3, pp. 287-308.

Chakravorti, B. 2004, ‘The Role of Adoption Networks in The Success of Innovations: A Strategic Perspective’, Technology in Society, vol. 26, no. 2-3, pp. 469-482.

Chau, P.Y.K. 1995, ‘Factors Used in the Selection of Packaged Software in Small Businesses: Views of Owners and Managers’, Information & Management, vol. 29, no. 2, pp. 71-78.

Chen, Y.-S., Chong, P.P. & Chen, J.C.-H. 2000, ‘Small Business Management: An IT-Based Approach’, Journal of Computer Information Systems, vol. 41, no. 2, pp. 40-47.

Chesher, M. & Skok, W. 2000, ‘Roadmap for Successful Information Technology Transfer for Small Businesses’, Proceedings of the 2000 ACM SIGCPR Conference on Computer Personnel Research, Chicago, pp. 16-22.

Cragg, P.B. & King, M. 1993, ‘Small-firm Computing: Motivators and Inhibitors’, MIS Quarterly, vol. 17, no. 1, pp. 47-59.

Fink, D. 1998, ‘Guidelines for The Successful Adoption of Information Technology in Small and Medium Enterprises’, International Journal of Information Management, vol. 18, no. 4, pp. 243-253.

Gutter, M.S. & Saleem, T. 2005, ‘Financial Vulnerability of Small Business Owner’, Financial Services Review, vol. 14, no. 2, pp. 133-147.

Hunter, M.G. 2004, ‘Information Systems & Small Business: Research Issues’, Journal of Global Information Management, vol. 12, no. 4, pp. I-V.

Levy, M. & Powell, P. 2005, Strategies for Growth in SMEs: The Role of Information and Information Systems, Elsevier Butterworth and Heinemann, Amsterdam.

Mako, C. 2005, ‘Training and Competence Development in The SME Sector: The Hungarian Case’, Journal for East European Management Studies, vol. 10, no. 2, pp. 156-185.

NOIE 2000, Taking the Plunge 2000: Sink or Swim? Small Business Attitudes to Electronic Commerce, National Office for the Information Economy, viewed 16 September 2002 2002 <http://www.noie.gov.au/publications/NOIE/SME/SinkorSwim2000.pdf>.

O’Regan, N. & Ghobadiah, A. 2004, ‘Short-and Long-term Performance in Manufacturing SMEs: Different Target, Different Drivers’, International Journal of Productivity and Performance Management, vol. 53, no. 5, pp. 405-424.

Putranto, K., Stewart, D., Moore, G. & Diatmoko, R. 2003, ‘Implementing A Technology Strategy in Developing Countries: The Experience of The Indonesian Rolling Stock Industry’, Technological Forecasting and  Social Change, vol. 70, no. 2, pp. 163-176.

Rogoff, E.G., Lee, M.-S. & Sub, D.-C. 2004, ‘”Who Done It?” Attributions by Entrepreneurs and Experts of The Factors that Cause and Impede Small Business Success’, Journal of Small Business Management, vol. 42, no. 4, pp. 364-376.

Sandee, H. & Rietveld, P. 2001, ‘Upgrading Traditional Technologies in Small-Scale Industry Clusters: Collaboration and Innovation Adoption in Indonesia’, The Journal of Development Studies, vol. 37, no. 4, pp. 150-172.

Welsh, J.A. & White, J.F. 1981, ‘A Small Business Is Not a Little Big Business’, Harvard Business Review, vol. 59, no. 4, pp. 18-32.

 

 

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