Impact of the Internet on Small Businesses - Research Paper Example

Impact of the Internet on small businesses Impact of the Internet on small businesses The influence of computers and internet on human life cannot bedescribed in few words. Virtually, there are no segments of human life at present which are unaffected by the developments in internet related technology. Communication, business, marketing, management, healthcare, advertising etc are some areas in which internet have already proved its worth. It is impossible for modern business groups to think about a world without internet at present. Irrespective of large scale, medium scale or small scale, all types of businesses are highly dependable to internet related technologies nowadays. Through the internet, a business of any size can compete in the global marketplace. In fact, on the internet, the size of an organizations operation makes little difference because the internet is an open environment. Similar companies compete against one another while being only a click of the mouse away. In other words, a buyer can locate numerous sellers offering similar merchandise, similar prices and similar offers in a very short time period. As more people and businesses become comfortable with the internet, the marketing landscape will continue to evolve quickly in the coming years (The Influence of Internet on Modern Business, 2009). The arrival of internet related technologies helped small scale industries immensely. Many of the traditional business concepts were given way for internet related business strategies because of the arrival of computers and internet. For example, internet helped the business world to convert many of the offline market spaces into online market spaces. Moreover, outsourcing, offshoring like modern business principles were evolved out because of the developments in internet related technologies. Advertising is another in which internet helps small scale industries immensely. Social networks are used extensively by the businesses for marketing and advertising purposes. At the same time, internet has the potential to affect small businesses negatively also. For example, internet helped globalization in many ways. It should be noted that globalization helped corporate companies to expand their business all over the world. The intrusion of corporate companies in small scale industry segments is causing big threats to the small business groups. In short, internet provides both opportunities and threats to small businesses. This paper analyses the impacts of internet on small businesses. Positive impacts of internet on small businesses The Internet potentially can be used by small businesses to support external (inter-organizational and enterprise-to-consumer) business functions as well as internal business functions. Although using IT to support inter-organizational business functions is not new, never before have small businesses been able to afford a global computer network as powerful and far-reaching, yet as accessible and cheap to use (Poon, 1997, p.466). Internet has the ability to impact both inter organizational as well as intra organizational activities positively. In other words, it has the capacity to raise the efficiency of internal works as well as external works. For example, “Some companies are using the Internet to make direct connections with their customers for the first time”(The Net Imperative, 1999). Relationship building is the core of modern business philosophies. Earlier, business groups were keen only in selling their products or services. At present they realized the importance of establishing relations with its customers before and after the selling of a particular product or service. This is because of the awareness that maintenance of existing customers is easier than locating new customers. Internet can help small business groups immensely in establishing direct connection with the customers. With the help of customized email messages, small businesses can establish deep relations with its customers. “Some business people are using secure Internet connections to intensify relations with some of their trading partners, and using the Internet’s reach and ubiquity to request quotes or sell off perishable stocks of goods or services by auction” (The Net Imperative, 1999). Instant communication is the major strength of internet. Instant communication with the help of internet helps small business to interact with its stakeholders like suppliers, purchasers, customers etc. Thus the pace of doing business can be increased immensely with the help of internet. 100 years ago it might have taken over a month to get a letter to a friend in another country. Today, communication is as easy as a mouse click, and much cheaper too. Anyone in the world can communicate with another person through text messages, emails, and even live video. For business, this means higher efficiency and quicker processing of sales (Bryant, 2013). Cost saving is another major benefit of using internet for boosting the prospects of small business. For example, book keeping was an expensive function for companies before the arrival of computers and internet. Computers and internet have made lot of revolutionary changes in the book keeping or document storing departments. Instead of papers documents, the usage of electronic document helped companies to store data quickly but also it helped the companies to preserve the documents or data safely for much longer periods. The transition of company documents from paper documents to electronic data helped small business to reduce the expenditure they made for clerical jobs earlier. Instead of searching a particular document in a bunch of paper documents or files, it is easy for a modern employee to locate or retrieve data easily from computers or internet. Moreover, internet helps small business to locate and purchase resources from distant market. If a raw material is expensive in domestic market, small businesses can import it from distant international markets at a lower rate. Same way, it is possible for small businesses to sell its products and services in international market with the help of internet. Entirely new companies and business models are emerging in industries ranging from chemicals to road haulage to bring together buyers and sellers in super-efficient new electronic marketplaces. The Internet is helping companies to lower costs dramatically across their supply and demand chains, take their customer service into a different league, enter new markets, create additional revenue streams and redefine their business relationships (The Net Imperative, 1999). Outsourcing and offshoring are new business concepts evolved out as a result of the development of internet related technologies. According to Thompson (2009), “Outsourcing refers to a business process in which a company contracts with another company to provide services that might otherwise be performed by in-house employees” (Thompson, 2009). Since current business world is extremely globalized, it is difficult for companies in expensive labour oriented countries to compete effectively in international market. For example, India and China are most heavily populated countries in this world whereas American and European continents are struggling to find enough manpower resources to execute functions even in critical sectors. In other words manpower cost in India or China is extremely low compared to that in American or Europe. Therefore, products manufactured in America or Europe could be highly expensive compared to the products manufactured in India or China. Thus, American made or European made products may struggle to compete effectively with the products from India or China, in terms of price. So, companies in America and Europe are currently outsourcing their business to India and China like cheap labour oriented countries. Thus, small scale IT industries in these countries are getting plenty of businesses from America and Europe. Dr. Singh has argued that the WWW has changed the traditional landscape of the business environment from that of being a Market place to one that is more of a Market space (Dr. Singh, N.d., p.2) E-commerce is one of the rapidly growing business segments in the world. As per the statistics released by US Department of Commerce in May 2005, the figures reporting that e-commerce sales in the first quarter of the year had been $19.8 billion for the quarter (up by 23.8% from the previous year) (Eschen, 2005). Even though e-commerce is controlled by corporate world, plenty of small businesses are also exploiting the possibilities of electronic sales of goods and services. For example, freelance writing is one of the major services developed as a result of e-commerce. Freelance writers from India or China can work for companies in America or Europe from the convenience of their home because of the development of e-commerce. E-commerce helps businesses to reduce the prices of products and services since the tax liability is less. It should be noted that a substantial portion of the prices of the goods and services purchased through offline means are related to various types of taxes. In the case of e-commerce, business groups are getting lot of tax incentives and hence they can reduce the prices of their commodities immensely. Advertising is another in which internet helps small businesses immensely. Many of the traditional offline advertising strategies were given way for online advertising with the introduction of internet. It should be noted that advertising is the core business activity which helps organizations to promote their products and services to the consumers. Even better quality products may fail in the market if proper publicity is not given. At the same time, even cheap product may excel in the market with the help of effective advertisements. In short, advertising can make or break a product. Thus, it can influence the success and failures of an organization. Internet helps companies to place targeted ads in front of the consumers. In other words, the themes of advertisements can be changed based on internets of the consumers across the world. No other advertising channels provide the facilities to promote customized advertising. Moreover, advertising with the help of internet is cheaper and effective compared to other channels of advertising. The growth of social networking with the help of internet related technologies, helped small businesses immensely. Social networking marketing spending has been increased a lot in the past. According to a report, it has increased from $884 million to $2.34 billion in between the period 2007-2009 (Dickey & Lewis, 2010, p.140). The term viral marketing has been evolved in the business world, mainly because of the influence of social networking. The major theme of viral marketing is mouth publicity. People on social networks are discussing the features or merits and demerits of the products or services, they purchased. “Recently, there has been a growing interest in understanding how WOM (Word Of Mouth), particularly online WOM (which is a form of social media), impacts sales, diffusion, and other marketing performance measures”(Stephen & Galak, p.5-6). Companies can influence the online WOM or discussions on social networks with the help of suitable marketing strategies. Internet and social networks can be used effectively by small businesses for the recruitment purpose. Social networks and web 2.0 are used extensively as the major tools in the online recruitment process. Web 2.0 is a collection of active technologies that allows users to interact with online content. Some of the most popular Web 2.0 applications include: social networks, blogs, podcasts, and online video” (Web 2.0 Recruiting, n.d., p.1). Online recruitment is believed to be cheaper, quicker and effective than offline recruitment. It should be noted that the employers may get access to millions of bio-data instantly from all over the world with the help internet. Social networks such as Linkedln have millions of bio-data posted by job aspirants from all parts of the world. Recruiters can go through these databases and identify the right talent instantly. “Earlier research into small business and IT has identified a number of factors which are important for IT success among small firms. These factors include management enthusiasm and leadership, use of IT consultants to provide know-how, competition and user participation” (Poon, 1997, p.466). The efficiency of management and leadership has been increased a lot because of the introduction of internet related technologies in small businesses. For example, it is easy for the leaders or managers to forecast the fluctuations in the market properly and take remedial actions well in advance with the help of internet related technologies. Timely market feedbacks are necessary for small businesses to make adjustments or fine tuning in business strategies. Internet helps small businesses to read the ups and downs in the market instantly. “More recent research on the topic of the Internet and small businesses points to the importance of training and demonstrated benefits while another view suggests that competitive advantage and competitor benchmarking are key issues in Internet use” (Poon, 1997, p.466). Competitive advantage is one of the major talking points in the business world at present. Competitive advantage of an organization depends on many factors. Adoption of internet related technologies definitely help small business organizations to increase its competitive power. Negative impacts of internet on small businesses Barkley et al, (n.d) has mentioned that even though e-commerce may reduce many of the disadvantages associated with traditional direct purchasing by decreasing marketing, communication, and information costs and increasing access to lower cost suppliers and services, it increases competition for the local or traditional customers from nonlocal Internet businesses (Barkley et al, 2007, p.1). Current business world is extremely globalized. Majority of the prominent companies are operating internationally at present. As a result of that small businesses are facing immense problems all over the world. Corporate companies have huge resources and hence they can increase their competitive power in the market at will whereas small businesses have limited resources to compete effectively with the corporate companies. For example, before the introduction of globalization, Indian retail industry was in the hands of some small business groups. However, the arrival of Wal-Mart like corporate giants has destroyed the small scale retail sector in India. It appears that a survey conducted by a reputed research institute has concluded that a single Walmart store can substitute for more than a thousand average retail stores in India. On the face of it, the claim is simultaneously dramatic as well as disturbing, both from the point of view of employment generation as well as that of the business interest of small and medium retailers (Dasgupta, 2012). It should be noted that globalization is responsible for spreading of cross cultural business. Internet related technologies helped implementation of globalization in many ways. Under such circumstances, it can be argued that the development of internet related technologies have caused big threats to the existence of small scale industries across the world. Cain & Jones (2008) “cited some examples of cases that involve the use of the Internet, such as the case of an employee in the Alberta Public Service who was terminated by her employer due to derogatory remarks made on several of her co-workers and management on her blog” (p.59). The above example clearly suggests that Internet has the potential to cause problems to organizations. It is easy for employees to engage in activities against the interests of an organization and stay anonymous. It is difficult for an organization to identify the culprits since the same computer could be used by many of its employees. According to Jaques (2009), “businesses are afraid of social networking because it represents a real and present danger to their corporate security”(p.20). The utility of social networks for small business has been discussed earlier in this paper. However, it should not be forgotten that social networks can also cause immense harm to an organization. An organization may have employees of different types. Some of them would be satisfied whereas others would be dissatisfied by the policies of the organization. Dissatisfied employees can make use of internet and social networks to spread rumours about the organization and thereby they can cause damages to the reputation of the organization. The Internet is not an end-all, be-all solution for business. Many businesses, small and large, often face significant upkeep charges for maintaining current technology in their business operations. Failing to maintain current technology in business may allow a competitor to use new Internet-based technology for creating a competitive advantage in the economic marketplace. Companies also must be careful to invest in technology that will be supported and commonly used in the business environment (Vitez, 2013). Advancements in internet related technologies are taking place at a rapid pace. Earlier internet related technologies utilized 2G band width whereas modern technologies use 3G bandwidth for the spreading of information through internet. It is believed that 4G is going to introduce across America in near future itself. In short, the speed of information exchange through internet is becoming lightning fast. It is impossible for small businesses to keep a blind eye towards such internet related technology developments. It is necessary to upgrade the existing technologies by the small businesses to stay competitive in the market. However, such upgrading may cause additional financial burden to them. Internet security is another big problem facing by businesses at present. Hackers are capable of breaking any firewalls created by the organizations to keep their data secure. Under such circumstances, it is difficult for business to update its internet firewalls time to time with modern technologies to stay secure. Such forced updating of technology may incur additional financial burdens to the business groups. The Internet also brings new competitors to many areas of business. It is within the ability of just about anyone to offer his products or services online through any number of selling venues, thus adding literally millions of new merchants to the global marketplace. For existing businesses, these new online sellers represent a challenge to retain customers or risk being driven out of business (Hartman, 2013). Internet has the potential to convert an ordinary person into a business person. In other words, the simplicity of doing business with the help of internet may encourage people to open more ecommerce websites. Thus, completions are getting stiffer all the time in the online businesses. Big companies may not be affected much with trends. However, small businesses may definitely feel the heat. Conclusions Internet has immense potential in bringing huge benefits to small businesses. It can help small business in areas such as recruitment, communication, management, leadership development, procurement, sales, marketing, advertising etc. The efficiency and productivity of small business organizations can be increased heavily with the help of internet. Internet helps business to operate cross culturally. Outsourcing and offshoring like modern business concepts are the contributions of internet. At the same time, internet has many negative impacts also upon small businesses. Internet is indirectly responsible for the spreading of globalization and international businesses. International businesses are destroying the backbone of small scale industries all over the world. it is easy for anyone to spread rumours about a company through internet or social networks. Competition is getting tougher as time goes on because of the arrival of new entrants into the market with the help of internet. References Barkley DL., Markley DM.& Lamie R. 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