Social Networking and Small and Medium Enterprises - Literature review Example

SME’s and Social Networking 1.0 Literature Review Social networking is defined as online building of communities of people linked by similar interests and goals (David, Jeffrey & David, 2010). Examples of social networking sites include MySpace, LinkedIn, Bebo, Facebook and Twitter that provide different ways in which people and businesses interact such as email, video and voice chat, file sharing, blogging and discussion groups. There are many benefits and challenges involved with integrating social networking in business and this has led to diverse conclusions of whether social networking is a viable tool in business operations. 65% per cents of SME’s proprietors in the USA believe social networking ultimately leads to net inefficiency in business operations (Stafford, 2008). . However, Sicilia & Palazon (2008), conclude that social networking improves overall efficiency in operations of a business. This literature review summarizes and evaluates finding of diverse research work done in different parts of the world in regards to social networking and business. It focuses on the impacts of Social Networking to performance SME's in this modern age of telecommunication. Marketing, publicity and communication are the main business activities in which SME’s integrate social networking and business (Rodgers and Thorson, 2000). The following literature review finds out how SMEs harness benefits rising form social networking and it also investigates how these enterprises try to mitigate risks of social networking which include reduced worker productivity, security and compromised legality of operations (Williams, 2009, pg. 225-228). Large enterprises embrace social networking more than SME’s in their operations (Doherty and Ellis-Chadwick, 57, 2009). The majority of research has focused on large enterprises and how they merge social networking in their organization. There are three main areas which have received little enquiry. These are the pros, cons and barriers of social networking in SMEs. This justifies the need to explore this field with interest. 1.1 Growth of Social Networking According to Weber (2009), both developed and developing states have experienced great effects of the social networking development. More than 130 million Europeans are involved in social networking in one way or another. Between 2006 and 2007, Facebook grew by 270% whereas Bebo which is relatively more popular in the UK than the US by 172% (Weber, 2009). However there are speculations that the amount of time people spend on social networks is reducing. This has been explained either as an indication in the growing completion in the social networks themselves or an indication that the record growth of 2006 and 2007 is not sustainable (Nikolaeva, 2006). Even with this explanations, the underway expansion of social networking website into non-English speaking countries shows that the influence it has will not fade out in the near future (Weber, 2009). According to the Institute of Real Estate Management (2010), members of IREM were asked to share ways they have used social networking as a tool to market their business to clients, manage properties, attract potential tenants or interact with current tenants. They also wanted to find out on the future prospects of social networking and results of their effort in integrating their areas of business with social networking. Klyuchnyk, in IREM (2010), indicated that potential clients can get information they require in a moment. This may include information about rent or price of an apartment in another city or even photos and its location. In Brazil, Twitter and Facebook are used widely by traders and companies that sell and purchase real estate. This is according to Fernanda (IREM, 2010). However, law firms are a bit reluctant to exploit networking as they should as they feel that social networking is strongly focused on personal relations rather than law practice (Rodgers and Thorson, 2000). A legal claim can be justified from comments in blogs where residents may record comments against a building (Nikolaeva, 2006). These can lead to problems relating to liability and can be used in a court of law against a party. However she remains positive to the encouraging impacts of social networking sites in connection to IREM Members internationally. Tertelis believes that social networking is a great tool for retailers and it would be noble for them to learn how to use it in daily operations of their businesses (IREM, 2010). He feels that it is easier for small and medium sized enterprises to employ the internet as a tool for increased performance and marketing than large organizations. He gives an example of how investing in big portfolios of real estate may not find efficient to use social networking, compared to property management companies that practice apartment leasing or residential development. From IREM, (2010), SMEs are seen to have a greater capacity to accommodate social websites in their operations 1.2 Advertising through Social Networking In a sample consisting of residents of a metropolitan area of south west USA, the following model was formulated about attitudes towards SME’s employing social networks for advertising. According to David, Jeffrey & David (2010), users’ perceptions on social networking advertisements being informative and entertaining were encouraging in using websites for advertising. The study findings are supported from the figures below (0.13 p < 0.001 and 0.55 p < 0.001). Although the path estimates that both invasiveness and privacy concerns were statistically significant, however, the strength of these two estimates indicated a somewhat weaker influence — as compared to, for example, entertainment, informativeness, and peer influence. It can therefore be concluded that people generally have a positive attitude towards the use of social networking for advertisement. This opportunity should be utilized by SMEs to increase their product’s awareness and sales revenues (David, Jeffrey & David, 2010). Standardized path coefficients and associated significance levels of Impact of Social Networking in Business 1.3 Is Social Networking Good for Business? Businesses existed way before the coming of the social networking so why has this tool become vital to business today and especially for small and medium sized enterprises? The change has been as a result of the alterations of businesses into rapidly increasing complexities of the modern life (Mathews and Healy, 2008). This phenomenon is felt more in the global business environment involving SMEs where clients and business partners have become more mobile today than any other time in history (Mathews and Healy, 2008). Benefits of how social networking is used in businesses have been looked into by various researchers. Mathews and Healy (2010) found that people conversant with social networking had better performance in e-training compared to people who were unfamiliar or had less familiarity with social networking. Managers having involvement in online social networking have been reported to have greater job satisfaction and they record better job performance than those who do not employ social networking as a tool in management of a business (Mathews and Healy, 2008). Davies Public Affairs, an award winning public firm, experienced employees’ dissatisfaction during a period of its growth as they felt that they were no longer familiar with each other (Ireland, Hitt, Camp and Sexton, 2009). It was said that they did not know who in the firm had expertise in a specific area and could not track events going on in the company. After the firm launched a socio networking platform for its enterprise, a survey was conducted and within a few weeks, employees voted the social platform to be the single most valuable tool in their operations. This shows how social networking increases efficiency in enterprises. The company was now able to synchronize the activities of its different people and departments where employees could now share knowledge efficiently. This was useful to new employees who were in need of guidance and directions onto how operations run. The company in general reduced its paper work, streamlined business processes and operations and recorded increased areas of known specialization by approximately 250 % (Ireland, Hitt, Camp and Sexton, 2009). Hewitt Associates is a human resource company which deals with outsourcing human resource and consulting. This company uses Facebook to stay connected to its employees and to stay in touch with former employers (Herrod, 2010). This has led to increased referrals by former employees who know the firm and its management well. It also helps the firm to re-employ its previous employees whenever they become available. In this way the company maintains employees who have experience and knowledge gained from working with associates. 1.4 SME’s uptake of Social Networking Only 1 per cent of UK’s SME’s use social networking to reach more customers (Etemad, 2004). A survey of 500 SME’s in the UK came to a conclusion that nearly 44 % of this businesses were uncomfortable with integrating social networking sites in their operations. Newcastle had the highest number of SMEs using social networking (70 %). This was followed by Manchester which had an average rating of 63 % comfort in using social networking sites. London was third with 62% comfort while Bristol came last having a 40 % figure representing how comfortable its SME’s were in applying social networking in business. In general, only 21 % of all the firms that were surveyed said that they use social networking to communicate with staff. This could be because of fear of change and overweighing the challenges of social networking (Caniato, Cagliano, Kalchschmidt, Golini and Spina, 2009, pg. 230). There is need for more SME’s to appreciate social networking. This can be achieved by educating its management on how social networking can be used as a tool to engage and understand tastes and preferences of those who demand their product or services. SME’s should also embrace the huge potential of networking in gaining insight into new market environments and knowing how a particular brand is perceived. Challenges of networking need to also be investigated in order to tackle them rather that outweighing them over the empirical benefits of social networking. 1.5 Challenges of Social Networking 1.5.1 Productivity Reduced productivity associated by social networking has been well documented which is mainly in form of loss of working hours (Borgatti and Cross, 2009). Borgatti approximated that in the UK alone, firms lose 233 million working hours in a month and with the increasing uptake of IT, this figure is expected to increase. Etemad (2004), placed cost on hours lost. It concluded that businesses in the UK lose 6.5 pounds a year due to productivity losses associated with productivity losses. Social networking sites have addictive effects than other websites (Doherty and Ellis-Chadwick, 2009). In addition, keeping profiles and accounts up to date is time consuming. There is also a relatively more time usage with the long winded way of sending someone a message using social websites compared to emailing. This is because of the high amount of irrelevant information about people’s profiles, advertisements and new features added by site administrators, whereas using e-mails these are easily avoided by using email clients such as Outlook Application among others. Employees are also known to invest more time on improving their personal social lives than creating value for the company. Productivity losses can be avoided by physical and remote monitoring of information exchanged via social networking sites (Doherty and Ellis-Chadwick, 2009). 1.5.2 Security Personnel using social networks in their work stations make a firm susceptible to information insecurity (Denzin and Lincoln, 2000). This is because social websites are designed in a way that the users have a great control of what is the website’s content and this is because they can upload different types of files without consulting site administrators. Malware documents can also be uploaded to websites through unsecure advertising servers, illegal hosting networks and even through widgets (Ashworth, Pioch and Schmidt, 2009b, pg. 134). There have been collaborative efforts by several major web sites in inadvertently hosting malware which makes a business prone to security threats. A case study on MySpace is a good example of this incident. A fast flux network was used to spread malware through a flash movie on MySpace website, as a result of this, 100000 accounts of MySpace were affected by the attack (Carson, Gilmore, Perry and Gronhaug, 2001). Considering that information used on the social networks is not backed-up, this poses a security danger due to the fact that information pertaining a contract or a client is lost in a social networking website; these could mean breach of confidentiality and lack of information. Employees do not often know this security threat and their Employers need to educate them on this potential security threat. 1.5.3 Legality and Compliance The informal nature of social networking has the potential of making users to be less caring in dispatching information and this could lead to legal consequences for SMEs (Ashworth, 2010b). Controversial information about an employee or employer can reach a greater target than a blogger may have intended, this may lead to the brand of a company being damaged and the SME losing credibility. Over 6,000 persons have been taken to court by the International Federation of the Phonographic Industry for unlicensed file sharing. IFPI has also written to universities and some SMEs whose websites have been used for unlicensed internet copying. These institutions have their operations highly integrated with social networking and therefore, they have limited control of what users do. This could lead to significant legal penalties which include injunctions, damages, costs and possible criminal sanctions (Ashworth, 2010a, pg. 22). Managers of SMEs should try and mitigate this by filtering contents on its employees regarding what they share on social networking, since lack of it could lead to benefit of Social networking being diluted by its costs. In conclusion, social networking websites have a great impact on small and medium sized enterprises. With the enormous growth in the popularity of social networking, stakeholders in businesses of all forms are engaged in one way or another. These participants include customers, employees and suppliers who use social networking for interaction for business and personal purposes. Both vertical and horizontal communication in business can be made more efficient by employing social networking in corporate communication. Even though it’s empirically proven that advertising and learning customer preferences via social websites leads to business growth, there are various huddles that inhibit application of business activities into social networking. These challenges include legal and compliance, security reasons and productivity loss among others. Managers of SME’s should not refrain from integrating social networking into business as they rather should embrace this social change in a safe and secure way to achieve competitive advantage and improved productivity. There is need to investigate empirically on the relationship between SME’s and Social Networking since most literature available studies large enterprises and the main reason behind it is the fact that most of the data available is regarding big organizations. References Ala-Mutka, K., Broster, D., Cachia, R. et al, (2009), The impact of social computing on the EU information society and economy, Joint Research Centre: Institute for Prospective Technological Studies Report, Seville, pg. 1-137. Ashworth, C. (2010a), Navigating a Retail Sector in Transition: Cases Indicating Primary Drivers of SME e-Retail Success in the Dynamic UK Fashion Marketing Sector, Paper: British Academy of Management Conference, Sheffield, UK, 14-16 Sept. Ashworth, C. 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