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Introducing Internet technology to any business allows it to take advantage of the many benefits it offers. The trend of e-business practices can be seen not only in large firms. If more businesses continue to adopt the Internet it may be imperative that SMEs begin plan Internet strategies. Hamish McRae, Associate Editor of the Independent Newspaper predicts ‘There will be no such thing as e-business because all business will be e-business. There is no opt-out: to be a success in any part of the commercial world in the future you have to be successful in the electronic aspects of your business as well as the physical ones’ (KPMG, 2000). However, Jeffcoate (2000) claims that ‘Many small businesses do not formally define, or understand their competitive strategy, a factor that serves to weaken their position in their chosen market…..unlike much larger companies, SMEs taking up E-commerce have very little choice of strategy.’ This essay will analyse the existing obstacles in implementing e-business models for SMEs.

Firstly, there is lack of Knowledge about e-business among SMEs’ managers. Research conducted by Hamill and Gregory (1997) discovered that 70% of the SME’s in their survey who were at that time ‘expressing an interest in using the Internet’, stated that limited knowledge and experience were the most important inhibiting factors. ‘Lack of awareness and understanding of the opportunities presented by the Internet’ are also identified by Timmers (1999:8) as one of the reasons businesses are hesitating to engage in e-commerce. Similarly research by Oftel (2000) showed that out of nine reasons for not connecting to the Internet, three were regarding information and knowledge. The reasons were ‘I would need more information on how the Internet could benefit my business before I became connected’, ‘We can’t spare the time to learn how to use the Internet’ and ‘Lack of knowledge about the equipment needed and how to use it’ (Oftel, 2000). Evidently, lack of knowledge and information is a significant constraint for small businesses connecting to the Internet.

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Secondly, the level of skills for using new technology is relatively low in SMEs. Small businesses that are already operating in the e-commerce market will be concerned with new technologies that can help them to improve the ones they have already adopted, or can be introduced to a certain area of their business. However, for small businesses that have only just decided to invest in e-business it can be more complicated. ‘If you do not embrace technology in during the next 12 months your business will start to fall behind the majority’. Webb (2001) Although this emphasises the importance of investing in the new technologies the Internet has introduced to businesses it is advised that ‘Technology must be seen as a productivity tool, and unless you are able to use it as such, you may well be wasting your money, and even worse, wasting your time trying to train yourself to use a device that will end up merely as a gadget.’ Webb (2001) Therefore, although it is important for small businesses to invest in technology in order to keep up with competitors, it is necessary for them to assess how the technology can be exploited in order to gain the full benefits is can offer. ‘Lack of skilled/trained employees’ is a problem in some small firms, therefore it is also important to make sure the people who work in the business also understand the new technology.

Thirdly, the cost for implementing e-business is also one of problems. ‘Developing and launching a new e-business plan is extremely expensive’ (Chaston, 2001:52). Just buying the right equipment can be the ‘biggest single hurdle.’ (Fisher, 2001) Research by Oftel (2000a) also suggests this. 23% of firms in the survey conducted said that it was ‘the cost of equipment’ and 22% said that it was ‘the cost of using the Internet’ that discouraged them from connecting to the Internet. (Oftel, 2000) The problem of finance being a constraint is supported by Rayner (2002) in research that was conducted into SME’s in the West Midlands. She discovered that the cost of hardware and software and the cost of getting and using phone lines were the most constraining factors SME’s encountered when introducing new technology. Research by Drew (2003) also supports this, ‘insufficient funds’ was found to be key barrier to doing business on the Internet in this study. Once the equipment has been bought, the next cost will be introducing all the technologies it offers to the business and training staff to use it. This is easier for larger companies as they are able to ‘draw on financial and other resources without the need to disrupt their existing operation.’ (Whelon & Maxelon, 2001). Small businesses on the other hand may struggle due to a lack of finance to train employees when it appears training may be necessary in most small businesses.

Lastly, it would be the most significant problem that most small businesses do not currently have an Internet Strategy. ‘There appears to be a consensus with regard to the need for strategy to be established before engaging in e-business. Notwithstanding this, there appears to be an international recalcitrance on the part of the SMEs to actually develop one’ (Downie, 2003). Downie uses a survey of Canadian small businesses as an example, stating;‘77% expected the Internet to have a positive impact on their business over the next two years, but only 32% had developed a strategy relating to their Internet presence.’ Similarly, research conducted by Oftel (2002) uncovered that many SME’s have a poor understanding of the ‘strategic importance of the Internet for their business.’ This meant that ‘few respondents had any ideas regarding future use or value of the medium’ (Oftel, 2002). It illustrates that a main barrier to doing business on the Internet is that small businesses are ‘unable to find a way to make money at it.’ A survey of almost 1600 SMEs in the south of England, uncovered that ‘43% of them had bigger budgets for tea and coffee over the past year than for the development of Internet strategies. The average Internet marketing spend of small or medium size businesses in the survey was £4,200, compared with an average tea and coffee budget of £10,000’ (Marketing Week, 08.23/01:17) Therefore, evidence suggests that most small businesses do not currently have an effective Internet strategy.

Although there is a lot of advises on how small business can make use of the internet such as developing websites and using electronic advertisement, the issue of how to develop an Internet strategy is not often discussed. Herman (2000) claims that there is ‘no single right way to build an e-strategy’. He does however stress the importance of developing and e-strategy in this day and age. ‘As the stages of e-business development evolve, more strategic thinking is required’ (Herman 2000). He advises that when creating an e-strategy begin with a set of questions, not with a set of actions. He also suggests that businesses plan their migration to e-business in ‘small, manageable steps.’ Although the advice offered by Herman is not specifically for small businesses, it could still apply to them.

In summary, the main factors which prevent the adoption of the Internet in SMEs are lack of internet strategy along with limited finance and knowledge about the new technology. It means most small businesses do not have an Internet strategy and simply use the Internet for e-mails and websites. Therefore, when small businesses set up websites developing effective internet strategies is important. Without having a strategy SMEs may not use internet technology to its full potential.

References

DREW, S. (2003) Strategic Uses of E-commerce by SMEs in the East of England, European Management Journal, 21(1), 79-88.
HAMILL, J, GREGORY, K. (1997) Internet Marketing in the Internationalisation of UK SMEs, Journal of Marketing Management, 13, 9-28
HERMAN. (2000) What is an E-Strategy? Business Communications Review, 30(4), 24-26.
JEFFCOATE, J, CHAPPELL, C, FEINDT, S. (2000) Attitudes Towards Process Improvement among SMEs Involved in E-commerce, Knowledge and Process Management, 7(3), 187-195.
KPMG (2000) E-business: Helping Directors to Understand and Embrace the Digital Age, London: Kogan Page.
OFTEL (2000) ‘Adoption of the Internet in UK SMEs’ (online)(16/08/03) <>
RAYNER, D. (2002) ‘Lifting the Barriers to Growth in UK Small Businesses: West Midlands (online)(16/08/03) <URL:http://>
TIMMERS, P. (1999) ‘Electronic Commerce: Strategies and Models for Business-to-Business trading.’ New York: Wiley
WHELON, J, MAXELON, K. (2001) ‘E-business Matters: A Guide for Small Businesses.’

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