Impact of Technology on Small Businesses - Essay Example

Impact of Technology on Small Businesses Table of Contents Introduction 2 2.Background 2 3.Research Aims and Objectives 3 4.Literature Review 3 4.1Use and Importance of Technology in SME’s 4 4.2Technology Evaluation 6 4.3Positive Impact of Technology 6 4.4Negative Impact of Technology 7 4.5Obstacles in adopting technology or reaping the perceived benefits of technology 9 5.Research Methodology 9 5.1Research Philosophy, Approach, Design and variables 9 5.2Data collection 10 6.Projected Timescale and Gnatt Chart 11 7.Literary References 12 1. Introduction Technology regardless of business size and complexity is imperative for its smooth operation (Keirman, 1995). Technology in businesses is used in various forms from a simple personal computer to automated computer manufacturing technology (Keirman 1995 and Brookyns, 2013). Moreover small businesses across industries depend on technology to perform daily operations, they use technology in form of information, communication, production, e-business etc., and it also helps them in balancing work-life (Smith, 2011). Small Businesses get affected by Technology both in positive and negative ways (Brookyns, 2010). In the present paper the impact of technology is critically analyzed to understand whether adopting technology in its various forms is profitable to small businesses or not through qualitative research methodology. 2. Background Small businesses drive the economy by leading in innovation and very crucial for national economies because of their large contribution in terms of employment and turnover (Burns, 2007). Small Medium Enterprises (SME) according to the Bolton committee is defined as an independent local firm whose ownership and management is vested in the same individuals and market share is small. A firm is termed as SME when it meets two of the three criteria’s namely consisting “up to 250 employees, up to £50 million annual turnover and £43 million annual statement of financial position total” as given by the European Commission of 2003 (Amm, 2011, p.1). Small businesses like large firms, in their operations try to apply latest technologies in order to be competitive, knowledgeable, more efficient and eventually more profitable (Kierman, 1995). However it has been found that technology is also negatively affecting the small businesses by decreasing the personal aspect of the business relationship, surveillance and constant monitoring using technology is decreasing employee morale and productivity significantly and brick and mortar small stores are losing their market share to large companies who use technology extensively (Hanley, 2013) moreover technology brings change that might not be adopted well by employees and is expensive and keeps changing (Keirman, 1995 and Burgess, 2002). 3. Research Aims and Objectives The research aims and objectives of the research are 1. To critically analyze the both positive and negative impact of technology on SME 2. To examine whether incorporation of technology is good for business that it increases profitability, efficiency, productivity and market share through Technology Evaluation. 3. To analyse whether costs incurred for technology are equal to the profits earned with implementation of technology. 4. To analyze the reasons why technology incorporation results in adverse impact, whether it is the technology itself or it is its implementation that results in adverse effect. 5. To probe whether the adverse affect is related to the firm’s size. 6. To give recommendations as to how technology can be used effectively by maximizing the benefits and minimizing the negative impact and using it as an opportunity rather a threat. 4. Literature Review SME’s compared to larger firms respond quickly to market threats and opportunities because they are more market-driven than larger firms who are more research driven. And use innovative technology or technology innovatively in developing new markets and about ten percent of SMEs are technology based and can be termed as innovative (OECD, 1998). 4.1 Use and Importance of Technology in SME’s SME’s due to their small size and lack of access to technology, R&D, human resources and to bigger markets are more vulnerable to changes in the environment, and competition (OECD, 1998). Therefore they need to be more responsive, competitive and satisfy the customers to the best. Hence SME’s use technology to reduce product or service costs while developing customized services (Ricupero, 2002). SME’s use technology perceiving that it will improve quality by ensuring quality control, promote orientation towards customers, improve the firm’s innovative capacity, improve product and service delivery, enhance employees productivity and efficiency and helps management in better control and evaluation and reduce delivery time and errors (OECD and Nepal et al,) . Technology like computerization is stimulated by trade (Paul and Siegel, 2000). From a study on SMEs in US it was found that majority of respondents responded that new product areas, innovations, lower costs, ease of use, customer service improvement, better partner coordination, better marketing, better capacity, better capacity management and better demand management are crucial business needs of SMEs and technology is employed to cater to these business needs of SMEs (Passerini, 2012). Figure 1 : Capturing SMEs Business Needs (Passerini, 2012) There are various technology tools that SMEs use to improve their operations some of them are: Customer Relationship management tools that improve customer interaction and employee training for the same. Knowledge management system tools that are used to create, store, and dissemination of information to the employees so that they can access and use for business transactions. Social Networking sites, information security systems, use of online collaboration sites, payroll management tools, video conferencing, company websites and enterprise management solutions. These tools not only increase business but also improve efficiency, customer relations and promote SME’s products and services and make them more accessible to customers (Times of India, 2013). 4.2 Technology Evaluation The contribution of technology in a business is ascertained by Technology Evaluation. “Technology Evaluation is a set of principles, methods and techniques/tools for effective assessing the potential value of a technology and its contribution to company’s competitiveness and profitability” (Bakouros, 2000, p.3). Technology evaluation helps the SME’s in ascertaining whether new technology has resulted in making more competitive and increasing profitability (Bakouros, 2000). The advantages from Technology evaluations are that it enables the firms to examine all the factors related with implementation of new technology, like improvement opportunities identification, processes; products and services innovation perspectives. It also helps the SME’s is ascertaining whether adoption of technology improved the product or service that are liked by the people, otherwise it has no value, therefore SME’s should examine whether technology resulted in making the product or service more competitive and give customer satisfaction (Bakouros, 2000). 4.3 Positive Impact of Technology Technology helps in “maximizing business opportunities” and information and communication technology increase sales. It was also found that lack of technology and its updating is one of the major factors causing the failure of SMEs (Olawale and Garwe, 2010). SME’s enjoy opportunities supported by Technology and are able to interact with customers in new ways that was not possible earlier for example interacting with customers using mobile technologies driven by broadband. The next generation SMEs are glamorous and ambitious with high growth and innovation illustrated in the below figure (Passerini, 2012). Figure 2 : Next Generation SMEs (Passerini, 2012) To fuel innovation, for enhancing agility of the business, improve information and communication management, to improve existing processes and systems, to compete and stay ahead of competitors and to improve customer satisfaction SMEs need to incorporate technology effectively (Khosla, 2011). 4.4 Negative Impact of Technology Irrespective of the benefits of technology usage it has been found that in actual business practices managements were not fully able to reap the benefits and implement it successfully. It is because technology was not integrated well with other processes or function, employees’ resistance towards it, management skill deficiency and interconnections problems with new equipment and high maintenance cost (Sohal, 1997) more so in SMEs compared to large firms. Technology plays a greater role than trade in the wage and employment structure change. Technology demands educated people to be employed so that they are able to use advance technology and reduces the demand for uneducated and without degree workers. And educated and workers with degree qualifications demand more wages and benefits thus increasing the employment cost of SME’s (Paul and Siegel, 2000). It has also been found that permanent technology negatively impacts employment and labour productivity (Wen, 2001). Technology is crucial and results in improving business and profitability of SMEs however technology use requires investment and involves cost and cost constrained SMEs find it difficult to acquire necessary technology and also it increases the overall cost of production and high cost of production effects the SME’s growth, thus affecting negatively however crucial it may be (Olawale and Garwe, 2010). Apart from that technology development process and transfer requires large investment and appropriate infrastructure that is not accessible to SMEs (Nepal, et al, 2003). “Technology transfer is usually considered as dissemination of information, matching technology with needs and creative adaptation of items for new uses” (Nepal et al, 2003, p.30). SMEs who cannot afford technology have to fight competition from both domestic and international firms who use technology extensively and most of the SMEs are failing and going out of business because big firms can use technology and gain unfair advantage (Hanley, 2013 and Nepal et al, 2003). SMEs use technology for quality control and monitoring of employees, however constant monitoring or surveillance of employees aided by technology makes the employees believe that they are not trustworthy and cannot take responsibilities thus it decreases their morale, confidence and productivity irrespective of the reason the monitoring is done (Hanley, 2010). 4.5 Obstacles in adopting technology or reaping the perceived benefits of technology The main obstacle is cost of various types like cost of equipment, finance, technology transfer cost, technical support cost, training cost to upgrade employees. Other than that organization culture, employees’ resistance, inability to evaluate technology impact and management competencies and willingness are some of the obstacles in successful adoption of technology (Rahman and Ng, 2012). From the above brief critical review of the literature it can be concluded that even though technology is crucial and beneficial to SMEs they cannot ignore the negative impact of technology on their business and face obstacles in successful implementation of technology to reap its advantages. 5. Research Methodology 5.1 Research Philosophy, Approach, Design and variables “Research is to solve problems and to expand knowledge of our universe which necessitates that it is carefully and systematically conducted” (Taylor, 2005, p.4). The research methodology used for this paper is qualitative research as for conducting research it is a valid technique. It uses inductive research methodology. Qualitative data makes it possible to explore the subject in a real manner as the data collected through qualitative concepts that is based on meanings derived from words thus is rich, full and in-depth (Saunders, 2003). Research philosophy is Ontology and epistemology as ontology will give the research its positivism and interpretivism is derived from epistemology as it will give in-depth analysis and objectivity to the research (Wilson, 2010). The research approach used is deductive and inductive to suit the research philosophy as both approaches are necessary to understand and interpret the data of qualitative research (Wilson, 2010). Descriptive research will be carried out to elaborate the data, use of technology in SME’s, perceived benefits of technology use, positive and negative impacts of technology on SMEs. The independent variable of the conceptual framework is technology and dependent variables are the impact of technology on SME’s affecting profitability, productivity, employee morale, quality control. 5.2 Data collection Data is collected using secondary sources and primary sources. Secondary data is collected from the critical review of past literature on the impact of technology on small businesses as review of past literature is essential and provides theories, ideas and data that can be used for testing and critical evaluation will bring out the merits and demerits of the past literature on the subject so that it can be used accordingly (Saunders, 2003). Secondary data will be collected from past literature review of relevant journals, books, and online data available on the subject. Primary research data is collected through Survey among the SME’s using structured questionnaire with open and close ended questions. Questionnaire is the most commonly used techniques for data collection in a survey and efficient way of collecting qualitative data (Saunders, 2003). Interviews will be conducted using Questionnaires with different SME’s personally or by telephone. The sample will consist of SME’s belonging to various industries selected randomly and the sample size would be 40 SME’s. Convenience sampling technique is used because of financial and time constraint (Wilson, 2010) and the random sampling technique bias will be eliminated by careful selection of the sample so that it represents the population (Gillham, 2000). 6. Projected Timescale and Gnatt Chart Chapter Name No of Hours Required to complete the Chapter Introduction 20 Objectives 20 Literature Review 160 Research Methodology 40 Primary Research Survey 100 Data Analysis and Findings 100 Final Report Presentation 60 6.1 Gnatt Chart 7. Literary References Amm, H. (2011). Why and to what extent small businesses are important for an economy. 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