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Small and Medium Enterprises,Internet and E-Business

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Use of Internet and E-Business Systems in Small and Medium Enterprises

The Internet has entered every sphere of human life. Business is included. E-Business and E-Commerce have revolutionized ‘buying’ and ‘selling’ throughout the world. Competition is now not among individuals but among nations. Information and Communication Technologies (ICT) and the economy have become so heavily dependent on each other that it has become very necessary to re-evaluate our business and economic environment. Big and small, developed and developing, every nation faces stiff competition in the World Market, which is now a Virtual Market. The Virtual World, with its numbers of host companies offers serious challenges to SMEs (Small and Medium scale Enterprises) all over. Never before have businesses, especially SMEs faced such heavy open competition both locally and globally. Among the many benefits of using the Internet based technologies with e Business, expand markets to increase revenues, reduce costs and strengthen customer relationships rank foremost. With e Business and e Commerce the Internet has brought increased productivity and efficient supply chains, while in marketing it has enabled businesses to extend their reach to access customers beyond traditional boundaries, and to tailor product offerings more closely to customer needs. In this scenario the SMEs can also seize the opportunity through networking or clustering to deal more effectively with the demands of larger, more powerful customers (Kapurubandara et al., 2004). In order to take advantage of the opportunities, the SMEs of the ceramic sector have to come up with new business strategies such as clustering and e Market strategies and link them to e Business Models to get the best advantage. For the whole industry to develop, we have to concentrate on national and industry wide strategies for funding, partnerships, infrastructure development, government support, legal framework, creating awareness, marketing strategies, etc  (Mahesha Kapurubandara, 2004)

Ecommerce was initially defined as a process of buying and selling of goods over the internet. Later it was developed as “exchange of information” in addition to “buying and selling of goods”. E-commerce can be identified as all the processes and activities, which facilitate the exchange of information (financial and non-financial) in an electronically mediated environment with the company’s stakeholders via computer networks. Furthermore, e-commerce has become a vital tool deciding the survival and expansion of the industry. Even though Sri Lankan retail industry is lagging behind in implementing e-commerce, the estimated benefits are far greater than imagined and SMEs in retail industry has every possibility to increase their market share with the implementation of e-commerce for their organizational activities. An assistance is provided for SMEs in retail industry by highlighting the importance of e-commerce for the industry and potential barriers that may face, so that managers can take appropriate steps to overcome the barriers in adopting e-commerce and implement relevant strategies to expand market share. This will help the firm to boost its financial performances too. (Govinnage & Sachitra, 2019). E-business has provided a unique opportunity for SMEs to be more competitive and to do business in a global environment. It is also suggested that there has been rapid growth in the use and adoption of e-business by SMEs. This new business technology also presents the opportunity for new ways to do business, giving rise to a new, and more flexible type of SME that is more successful in doing business. In developing countries there is, however, a lack of empirical evidence regarding the adoption and use of e-business in organizations, and in particular in SMEs (Al-weshah & Al-zubi, 2012).

Importance of using internet and e-business systems for small and medium enterprises

SMEs can benefit either as producers of Information and Communication Technology or as users of ICT for purposes such as increased productivity, faster communications and reaching new clients. While ICT can benefit SMEs in multiple ways, SMEs have to identify their own obstacles in Enterprise Information System adoption, considering their own business priorities and strategies. The major constraints being identified are level of initial investment, organizational culture, readiness, top management support, relative advantage, complexity, and compatibility, the level of external IT support, economic and economic growth, and competitive pressure. To remove these constraints, governments need to do more than merely improve the ICT national policy and promote SMEs‟ ICT use/awareness. The willingness of SMEs to integrate e-business practices depends on how much it can directly improve their core business and how much the potential benefits outweigh the definite costs (Malawige & Nanayakkara, 2014).

It is worth to note that the presence of Internet has offered greater advantages for businesses. Businesses could obtain several benefits by participating in e -Business such as: reduce transaction cost due to elimination of middleman, identify new market, improve intra and inter – organization communication, engaging better relationship with suppliers and having more opportunities to have larger playing field with other larger companies. Moreover, Poon and Swatman claimed there are five main benefits linked to the adoption of e-Business as: ability to have wider exposure in the market, direct and indirect marketing, lower communication cost, capture more market and enhance company image. Hence, shifting to the implementation of e-Business would not only bring abundant benefits to firms but also allowing them to assess greater opportunities to achieve efficiency and effectiveness as their competitive advantage (Janita & Chong, 2013). The Sri Lankan government is currently on the process of upgrading the Internet infrastructure and developing it in the form of installation of super-fast telecommunication network using fiber optic cables and other necessary hardware. This is mainly due to the fact that Sri Lanka is unable to meet the changing requirements in the World Wide Web due to its weak and poor infrastructure. The rapid advancement in both Internet software and hardware has also lead to more and more organizations allocating resources to meet the changing requirements in E-Commerce. Large corporations, Small and Medium Enterprises (SMEs) and individuals are all investing more and more in the Internet business. The main challenge for this SME s in adoption of E-Commerce is the lack of facility and resources in according to changing needs of the customers. The large corporations are finding no difficulties in their concurrence in E-Commerce world mainly because they have large resources and facilities compared with the SMEs. Senarathna and Wickramasuriya (2011) indicated that in Sri Lankan context there is a positive correlation between the adhocracy cultural characteristics among the SMEs and the level of e-commerce adoption (Gunawardana, 2018).

Small and medium enterprises (SMEs) and their adoption and use of various forms of electronic business (e Business) have been the subject of considerable research, especially over the last decade with the commercialization of the Internet. Our extensive search of the literature identified at least 120 journal articles published between 2003 and 2006 with a focus on SMEs and e Business. Many looked at Internet or website adoption and use in particular. It is therefore an opportune time to conduct an analysis of this large body of recent journal articles dealing with SME’s use of e Business in order to identify trends and opportunities for new future research directions. Previous analyses of SME- e Business literature have tended to take the form of meta-analyses which have focused on identifying and analyzing factors (drivers and barriers) which aim to predict or explain why SMEs adopt (or do not adopt) different forms of e Business (Parker & Castleman, 2007). Small and medium enterprises (SMEs) are the cornerstone of many economies. As a group, SMEs account for 95% of the world’s enterprises and absorbs 60% of employment according to recent data from the International Finance Corporation (International Finance Corporation, 2011). In the increasingly global and digital economy, SMEs are expected to employ e-business to stay relevant and more importantly ahead of the competition. While consumers in general seem to have embraced e-business to a great extent, SMEs are not necessarily so. This is despite the promised potentials of e-business use as well as the nature of SMEs that are smaller in size, may be receptive and adaptive to changes (Hadi Putra & Santoso, 2020). According to Zhu et al. (2006), e-business has the potential to transform whole organizations, alter their organizational structure and significantly modify their business processes. Moreover, e-business has an impact on the relationships with customers, suppliers and other business partners. E-business can be described as the integration between communication technologies, business processes and management practices. Argue that web technologies assist organizations in understanding the needs of their customers (marketing capability), customize their products and services (customer satisfaction enhancement), adopt product-market solutions (react rapidly to the changes in the external environment), and take orders from customers. (Improvement in speed of delivery, decreased costs, global approach, increased customer satisfaction) (Chatzoglou & Chatzoudes, 2016).

The current business environment has been changing ever since the emergence of new technological advancements from time to time. E-Commerce is one such technological tool to conduct businesses in a new way which is defined by Chaffey as all types of electronic transactions between organizations and stakeholders. Furthermore, communication within the business has become faster and managing resources has become more efficient with the implementation of e-commerce technology. Yet there are many drawbacks which hinder the adoption of e-commerce by an organization including high operating costs, high staff training costs, etc. Influencing dynamics for the adoption of ecommerce may vary based on the industry in which the organization operates. In manufacturing industry, factors such as competitor pressure, government support, top management, organization readiness, perceived benefits and perceived barriers would govern the adoptability of e-commerce to an organization whereas order fulfillment, new entrants, distribution and mass customization would mainly influence in textile and apparel industry.

Barriers for SMEs to join the e-business system using the Internet

Research conducted on e-business in developing countries has largely focused on factors responsible for adoption, barriers to adoption, challenges of adoption and the benefits of e-business and consumer attitude to e-business adoption. Relatively little has been published on e-business strategy per se, although the difference in cultural, technological and sociopolitical contexts between the developing and developed worlds is highlighted in some of these papers (Wynn & Olayinka, 2021).

What is immediately clear from these analyses of SME adoption of ICT is that there are formidable barriers to firms entering the digital economy. A review of available literature would suggest that there are at least six forms of barrier:

(1) First, and probably most importantly, many SMEs are unaware of the potential of ICT to enhance their business operations, or they consider that these technologies and techniques are not applicable to the products and services they offer, or the manner in which they choose to do business.

(2) Some SMEs occupy small and clearly defined niche markets, sometimes entirely local, that do not need the global connectivity available through the Internet. These are niches where word-of-mouth acts as the guarantee of quality, service and reliability, and these are businesses where trust and stability underpin successful operations.

(3) There are at the very least perceptions of unresolved security and privacy issues associated with the use of the Internet. These problems are most acute in relation to making payments online, and they discourage small firm take-up of this technology and way of doing business.

(4) Many SMEs lack the necessary IT skill-base to engage with the digital economy. Some may have ICT enthusiasts as owner managers, but the majority of firms do not. The lack of staff to implement ICT is a separate aspect of this same deterrent. It may well be difficult or too expensive for an SME to hire people with the necessary technical expertise to pursue an ICT strategy.

(5) The high initial set-up costs and perceived on-going costs of ICT and e-business can act as a barrier to take-up among SMEs. These firms can find that they cannot finance the necessary additional investment. Equally, that investment might not be cost effective, and it might be better for the firm to outsource its IT activities.

(6) Some SMEs will be restricted in their ability to evolve their ICT provision because of a legacy of IT sunk costs. Most small firms do not have the luxury of resources for experimentation in the IT area. Their investments need to work for them and cannot be quickly written down. To adopt new IT solutions and e-business models, they need to be able to integrate this new provision with their existing provision. Where this is not possible, that existing equipment is a formidable barrier to progress (Taylor & Murphy, 2004).


Al-weshah, G. a, & Al-zubi, K. (2012). Study of Smes in Jordanian Communication. Global Journal of Business Research, 6(3), 1–16.

Chatzoglou, P., & Chatzoudes, D. (2016). Factors affecting e-business adoption in SMEs: an empirical research. Journal of Enterprise Information Management, 29(3), 327–358. https://doi.org/10.1108/JEIM-03-2014-0033

Govinnage, D. Y., & Sachitra, K. M. V. (2019). Factors Affecting E-commerce Adoption of Small and Medium Enterprises in Sri Lanka: Evidence from Retail Sector. Asian Journal of Advanced Research and Reports, 6(2), 1–10. https://doi.org/10.9734/ajarr/2019/v6i230147

Gunawardana, K. D. (2018). E-commerce in small and medium enterprises in Sri Lanka. International Journal of Sociotechnology and Knowledge Development, 10(2), 54–68. https://doi.org/10.4018/IJSKD.2018040104

Hadi Putra, P. O., & Santoso, H. B. (2020). Contextual factors and performance impact of e-business use in Indonesian small and medium enterprises (SMEs). Heliyon, 6(3), e03568. https://doi.org/10.1016/j.heliyon.2020.e03568

Janita, I., & Chong, W. K. (2013). Barriers of B2B e-business adoption in Indonesian SMEs: A literature analysis. Procedia Computer Science, 17, 571–578. https://doi.org/10.1016/j.procs.2013.05.073

Kapurubandara, M., Arunatileka, S., & Gnige, A. (2004). Application of ebusiness strategies for SMEs in developing countries. Proceedings – 2004 IEEE International Conference on e-Technology, e-Commerce and e-Service, EEE 2004, 49–59. https://doi.org/10.1109/EEE.2004.1287289

Malawige, I. R., & Nanayakkara, L. D. J. F. (2014). SME EIS adoption: Towards development of EIS for SMEs in Sri Lanka. 2014 14th International Conference on Advances in ICT for Emerging Regions, ICTer 2014 – Conference Proceedings, 1(I), 172–178. https://doi.org/10.1109/ICTER.2014.7083897

Parker, C. M., & Castleman, T. (2007). New directions for research on SME-eBusiness: insights from an analysis of journal articles from 2003 to 2006. Journal of Information Systems and Small Business, 1(1–2), 21–40.

Taylor, M., & Murphy, A. (2004). SMEs and e-business. Journal of Small Business and Enterprise Development, 11(3), 280–289. https://doi.org/10.1108/14626000410551546

Wynn, M., & Olayinka, O. (2021). E-business strategy in developing countries: A framework and checklist for the small business sector. Sustainability (Switzerland), 13(13). https://doi.org/10.3390/su13137356

Diluka Bandara
Diluka Bandara
senior student, Rajarata university of Sri Lanka


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