Advancements in internet technology have revolutionized the way business is carried out both in large and small scale. Small and medium companies have embraced e-commerce and other related online trading platforms to reach out to their consumer base while delivering the requirement and demands of their clients (MacGregor and Vrazalic, 2004, 2). E-commerce is the electronic transfer of information across the internet to transact business and other related activities. SMEs may not have enough resources primarily to expand and sustain its operations as well as meeting the demands of their customers. As such utilization of the internet that does not necessarily require use, physical resources may be an important option especially for a business that does not have adequate resources (Khosrow-Pour, 2013, 132). SMEs are those commercial enterprises that employ less than 250 workers and have an annual turnover of fewer than 50 million Euros.
This academic paper will discuss how e-commerce has changed small and medium-sized enterprises and the manner in which they conduct their business operations. SMEs are many in number than large corporations and as such employ many people and contribute more towards the economic growth of a nation.
E-commerce just like any technological change has brought with it several transformations to the way businesses are being run. The question that begs for answers is, 'what are the changes that e-commerce has brought to SMEs? It is necessary to determine how e-c commerce has transformed SMEs and the way they do business. Answering this question is important since it helps to identify some of the dangers and risks that business to get exposed to when carrying business activities online. An overview of the benefits that SMEs obtain through engaging in the e-commerce can also be determined. A further discussion of how e-commerce has influenced the manner in which businesses are being conducted is necessary so as to understand the nature by which SMEs rely on electronic commerce platforms to conduct businesses (Al-Qirim, 2004, 16).
The study will involve the review of relevant literature from print and electronic libraries so as to gather empirical evidence on how e-commerce has affected SMEs. Relevant case studies will also be incorporated into the essay so as to bring about the empirical proof of the real effects of the online business transactions and related activities.
E-commerce has impacted positively and has been a catalyst for the growth of several SMEs. The positive impact is due to the numerous online marketing and payment platforms provided by e-commerce.
Impact of e-commerce on SMEs
Different schools of thoughts define an SME organization differently. The variations in definitions are usually based on the annual turnover of the business as well as the value of the balance at a particular point in the financial year. Different countries and regions of the world also have their criteria for classifying businesses as to whether or not they are SMEs (MacGregor and Vrazalic, 2004, 4). For instance in the United States, a small business standards are set by the Small Business Administration by an industry, ownership structure, number of employees and the revenue. An SME is thus considered to be that enterprise with fewer than ten employees in small offices.
The contribution of entrepreneurship towards economic development can never be overestimated. One of the primary vehicles for starting new businesses includes the small and medium-sized enterprises. SMEs are as seen as the catalyst for the growth and innovation in many parts of the world (Lee, 2009, 421). The vital role of driving economic growth is seen in the form of employing additional workers, development of new products and production of new goods and services. SMEs form a central tax base for governments and authorities around the world. As such the governments get the vital funds for development of the various projects (Pease and Rowe, 2003, 1). In the Asia-Pacific region, for example, SMEs are said to account for over 97% of all businesses and absorb a significant portion of the workforce in the area. The majority of the countries in the world are said to have experienced growth in GDP with SMEs contributing 20 to 50% of the total GDP of most economies. Flexibility in the production is seen as a significant benefit of SMEs as new and improved products can be obtained and utilized by different individuals in the global market.
SMEs have therefore been accepted as engines for an eradication of poverty and economic growth around the world. Studies have indicated that the owners of small business around the world have the same characteristics and face the same obstacles especially in the process of carrying out their commercial activities. The major difference in understanding is however seen in the understanding of how SMEs lead to the development of economies by the different individuals around the world (Pease and Rowe, 2003, 2). SMEs are further seen as the principal vehicles by which new businesspeople can continuously supply new ideas, skills and innovation into the economy of a country and the world as a whole. The uncertainties in the external business environment in which SMEs operate make e-commerce a suitable tool for stemming out the potential business risks (Wymer and Regan, 2005, 13).
E-commerce is gaining popularity in the global economy. Electronic commerce (e-commerce) involves the transaction of business activities over the internet. Some of the types of companies that may involve e-commerce include retail sites, music and auction sites. Corporations may also exchange trading goods and services between businesses. Consumers are thus able to exchange goods and services electronically without the barriers of distance or distance. E-commerce is currently considered as one of the most important aspects of the advancement of internet technology. To carry out e-commerce activities businesses need to possess an Electronic Data Interchange (EDI). The EDI entails a supplier and a customer establishing a data link between them (MacGregor and Vrazalic, 2004, 5).
Some of the strategies used by SMEs to conduct e-commerce include online retail services and payment services. Amazon is an example of an enterprise that has utilized electronic retail to expand into a global market base. The Company was started as an online bookstore but has now established itself has an online store for a variety of products such as clothes, music, household goods and many others (Khosrow-Pour, 2013, 136). EBay is another example of an online retail store from which one can buy variety of products like electronics, cars, baby items, collectibles and many others online. Providing online money transfer services has enabled technology start-ups such as PayPal and Payoneer to grow into global companies.
The process of conducting business online has expanded at a rapid rate over the past five years. The accelerated growth rate is predicted to continue into the future with a further acceleration of the growth rate expected of the trend (Lee, 2009, 422). Various businesses are expected to move sections of their business operations into the internet as the boundary between the electronic, and regular trading becomes fainter than before. The benefits that companies acquire from conducting activities online are many. Some of the advantages of e-commerce include competitive advantages that the enterprise earns over the conventional trading methods. Online commercial transactions are fast, relatively cheap and efficient as such businesses not only cut the cost of doing business but also achieve more satisfied customers whose demands are met in time. E-commerce is thus seen to lead to the development of electronic marketplace in which sellers and potential buyers come together to transact business for the mutual benefits of the parties involved (Laudon and Traver, 2007, 2).
E-commerce has been proven to provide substantial benefits to business regardless of their sizes. The major transformation of the SMEs by the e-commerce is seen mostly by the improvement of the efficiencies and raising revenues of the businesses through increased sales that are done online. E-commerce has helped SMEs to create opportunities for new enterprises and other related ventures. The SMEs that have embraced electronic trading have reported increased exports and a significant rise in the general business activities (Caner, 2010, 1).
Some of the benefits that SMEs acquire from the adoption of the electronic trade include improved competitiveness, worldwide presence, faster response to customers' demands and mass customization of products and services. Application of the e-commerce technologies by SMEs has especially in the business-to- business relations has led to optimization of business processes as well as cost savings operations. Electronic trading also enables SMEs to automate most of their business operations and thus leading to reduced operation costs (Caner, 2010, 2).
Electronic trading has been said to enable the small medium enterprises to compete effectively with the larger businesses. Benefits of e-commerce are not realized by companies due to the slow adoption rate of the tools that are related to electronic trading (Al-Qirim, 2004, 17).
Overall sales that occur over the internet represent a significant proportion of all the commercial sales that take place in the world today. The growth of electronic trading can also be attributed to the access the internet by mobile phones. In some countries, mobile phone applications are used not only for calling and texting but for business related activities such as mobile banking (Al-Qirim, 2004, 17).
The main findings of this study illustrate how small and medium companies have embraced e-commerce and other related online trading platforms to reach out to their consumer base while delivering the requirement and demands of their clients. E-commerce has been the catalyst for the growth of several SMEs. The significant change in how small and medium-sized enterprises conduct businesses include online payment for goods and services. There are many differences in the definition of the term SME. The differences in definitions are commonly based on the annual turnover of the business as well as the value of the balance at a particular point in the financial year. An SME is considered to be that enterprise with fewer than ten employees in small offices (Blackburn & Schaper, 2012, 12).
Small and medium-sized enterprises contribute majorly to the development of the economy of many countries. SMEs are seen as the catalysts for the growth and innovation in many parts of the world (MacGregor, 2007, 249). The vital role of driving economic growth is seen in the form of employing additional workers, development of new products and production of new goods and services. Other ways in which the SMEs are seen to help boost the economy of various countries include the formation of the tax base for governments and authorities around the world. The funds collected by the governments are thus used for development projects (Blackburn & Schaper, 2012, 12).
SMEs are seen as engines for the eradication of poverty and economic growth around the world. Studies have indicated that the owners of small business around the world have the same characteristics and face the same obstacles especially in the process of carrying out their commercial activities and other related business transaction. E-commerce is gaining popularity in the global economy. Electronic commerce (e-commerce) involves the operation of business activities over the internet. E-commerce is gaining popularity in the global economy. Electronic commerce (e-commerce) requires the operation of business activities over the internet. The adoption of e-commerce by small and medium enterprises include the improved competitiveness, worldwide presence, faster response to customers' demands and mass customization of products and services (Wymer and Regan, 2005, 10). Online business transactions are fast, relatively cheap and efficient as such businesses not only cut the cost of doing business but also achieve more satisfied customers whose demands are met in time. E-commerce is thus seen to lead to the development of electronic marketplace in which sellers and potential buyers come together to transact business for the mutual benefits of the parties involved (MacGregor and Vrazalic, 2004, 1).
In my opinion, e-commerce has brought a positive transformation to the SMEs and the manner in which they carry out their business operations. I firmly believed that electronic trading is an important aspect of the modern business that should be embraced by any business that desires growth and sustainable competitive advantage. As such I would advise that small and medium enterprises to adopt e-commerce as a part of the strategy to increase their growth rate and compete effectively in the global market. SME is an important sector of the economy as such the government, and the business owners should make efforts to protect the businesses by ensuring their sustainability (Blackburn & Schaper, 2012, 13).