Impact of Internet Technology on Managemnet in SMEs - Iloka Benneth Chiemelie
https://ilokabenneth.blogspot.com/2013/11/impact-of-internet-technology-on.html
1.0 INTERNET AND TECHNOLOGY EFFECT ON ORGANIZATION’S MANAGEMENT IN SME
In the past, organizations paid less attention to quality and responsiveness, but around the 1990s this changed with the introduction of “new organization management” (Hughes, 2003; Saxena, 1996). I do strongly agree that internet and technology leads to effective management for SME. It was estimated that SME’s share of E-commerce rose from 17 per cent in 1997 to 30 per cent on 2003 (Goldman, 1999), because the internet provided opportunities for SME’s to go global virtually overnight. The internet and technology has increasingly become diffused globally, bringing markets (potential buyers) into a global networked economy (Gibbs and Kraemer, 2004). The SME’s for example can compete globally simply by creating a home page (Sterrett and Shah, 1998).
The internet offers new opportunities in the business-to-business world (Hamil et al, 1997). Some of the desirable benefit of internet and technology in organization’s management has been defined by Evans and King (1999) as a total new value chain. This change in the value chain is described further below.
1.1 Value chain: since it was proposed by Porter in 1985, studies has recognized direct and indirect benefits of the value chain model, including reduced transaction cost with organized management (Malone et al, 1987) and integration of products and services (Normann and Ramirez, 1993). The concept of value chain has been redefined by increasingly information technology and internet. The internet has the power to profoundly change the dynamic market structure of the SME, making basic rules of competition obsolete and introducing new value chains to form with new management, product and services in the market (Evans and Wuster, 1997; Hackney et al, 2002; Rahman, 2004).
The proliferation of the internet gives consumers increased power and thus restructures and redistributes the value chain (Benjamin and Wigand, 1995). Furthermore, E-market lowers coordination and distribution cost, eliminates market intermediaries, as consumers can directly access manufacturers and reduces management tasks, since they don’t need to deal with intermediaries for distribution.
On the other hand, researchers predict that the growth of e-commerce could reinforce traditional intermediary positions in the SME, which may also promote the growth of new generation of intermediaries (Sakar et al, 1996). Firms may take advantage of the internet to gain strategic advantage by using business-to-business strategy (B2B) value chain to bypass in the value chain (Evans and Berman, 2001; Chan and Artnangkom, 2002).
1.2 The EBay Illusion: example of how internet and technology affect organization’s management in SME. Advance in computer and communication technologies have built an internet economy, a “revolutionary” development (Sheth et al., 2001) that resulted to calls for a “paradigm shift”. EBay is a clear example of revolutionary development that has promoted shift in the paradigm of sales. By the use of internet, EBay was able to develop an auction website, where buyers meet sellers directly using their computers (technology) to access information for the products they want, make purchasing decision by evaluating their purchasing power using calculators (technology) and then make the purchase online (internet) or by account deposit (internet and technology). By eliminating middle-men, EBay has created more company-customer access and even individuals can sale their own products, therefore creating increased productivity, high sales and low purchase and high but conducive competition.
However, the trend to purchasing from the internet is associated with the perceived risk of such purchase (Aldridge et al., 1997; Ernst and Young, 1999; Wang et al., 1998) possible post purchase problems (Bauer, 1960; Cunmingham, 1967) and uncertainty (Bauer, 1960).
EBay has improved management in SME, by developing an online market where customers can meet with manufactures, order their goods and services and SMEs can reduce cost of management and advertising. Direct links with customers, suppliers and distributors and facilitates transaction; facilitates information transfer; enhances new product development and services for existing products and customers (Walters and Lancaster, 1999); and offers companies opportunities to market product globally (Karakaya and Karakaya, 1998; Tiessen et al., 2001).
In conclusion, Internet leads to effective management in SME because; items once paid for would be delivered within specific dates rather, leading to on-time production and distribution of goods and services. Other benefits includes direct saving such as product promotion, new sales channel, inexpensive advertising medium, enhanced company image, new business opportunities, and better support from suppliers (Walczuch et al., 2000; Nath et al., 1998; Poon and Swatman, 1999).
2.0 E-COMMERCE IS LEADING THE FUTURE AND IT WOULD SLOWLY REPLACE THE CONVENTIONAL PRACTICES OF BUSINESS
E-commerce relates to the process of buying, selling, or exchanging products, services, and information via computer network (Greenstein and Feinman, 2001; Laudon and Laudon, 2002; Turban et al., 2004).
Electronic communication links between firms has been described as a key tool for at least 20 years. Malone et al. (1987) argue that electronic communication has changed the supply chain by enhancing reduction in cost of coordinating economic transaction and production. Supply chain management refers to the management of different processes, such as customer relationship, customer service, demand, order, production and material flows and purchasing management (Lambert et al., 1998). Internet tools can be classified as: e-commerce (Brynjolfssson and Smith, 2000) – sourcing support, procurement, tendering, fulfillment processes and e-manufacturing (Kehoe and Boughton, 2001) – demand and capacity planning support, internal chain integration and furcating.
A recent US Department of Commerce report revealed that the electronic business is growing exponentially. The fast growth of e-commerce is attributed primarily to economic is attributed basically to economic imperatives and advancement in technology. Porter (2001) proposed that e-commerce shifts bargaining power to end users, increases the number of competitors and reduces differences among them. E-commerce has is changing the way companies do business. For instance, some companies are moving their business entirely to the web (e.g. egghead.com), some establish subsidiaries and spin them off as separate online business entities (e.g. barnesandnoble.com), while others invest in online startups (e.g. PetSmart).
Ghosh, (1998) identified that they are many reasons why e-commerce will slowly replace conventional business practices. These reasons are described below.
2.1 Connectivity and interactivity: connectivity in e-commerce exists between information systems, and communication is a two-ways and real time process (Gossain and Kandiah, 1998). This feature enables real time pricing, customer-seller interaction and lows cost information distribution. Effective e-commerce is a seamless, customer-focused operation that works towards the highest level of customer satisfaction. Armstrong and Hagel (1996) revealed that Facebook for example, has built a stronger and deeper relationship with customers and companies, because customers can comment on their company’s page anytime (e.g. facebook.com/hitzfm). This form of connectivity is changing the conventional telephone practices in business.
2.2 Network economies of scale: network effects are much stronger in digital world, and marketers take advantage of this effect to build a critical mass of installed customer base. E-commerce is changing the basis of competition. For example, e-commerce continues reducing the transaction cost of sellers and increases the penetration of seller’s message into the market. On the other hand, it makes it difficult for sellers to differentiate their products, and consumers will be more easily able to compare prices and feature. In addition, e-commerce is changing the conventional distribution rules through direct sales. Compaq built the best retail-distribution network in the computer industry in 1990s, but presently can’t compete with the Dell’s fast and light direct sales enable by e-commerce (internet technology) (Browning and Reiss, 1999).
2.3 Economics of abundance: information is a source of revenue (Rayport and Sviokla, 1995) and every business is an informative colony (Evans and Wurster, 1997; Earl, 1999). E-commerce enables a near zero information distribution. The trade-off between reach in information and richness has been blown up, since information can reach many people through the internet without sacrificing the richness of the information’s contents (Evans and Wurster, 1997). This form of e-commerce, is replacing the old conventional practices of newspapers and media
2.4 Presumption: customers are given the opportunity to define the end product, according to their taste and development process (Tapscott, 1996). E-commerce its self is a source of value and provides information to develop new customer-company relationship at a lower cost (e.g. FedEX and UPS), it also presents new service creation opportunities (i.e. new business and revenue models) and improves internal efficiency (e.g. Boeing’s intranet). This replaces the old conventional practice of intermediaries.
2.5 Allowing the dinosaurs to fly; the distribution channel effect:the elimination of intermediaries makes business between customer and company easier, less expensive, and more standardized. Values generated in e-business transcend industrial sectors (Tapscott, 1999). For example, a company can change its brand and existing physical store to serve its e-commerce customers (e.g. toyrus.com), or offer customers assistant for products purchasing (e.g. edmunds.com) or commodity (e.g. plasticnets.com).
In modern day world, the impact of e-commerce in conventional business strategies magnified in on day to live. A clear example is, an airline company, provides service (travelling) to their customer, the customer pays online and prints out the ticket online. This cuts distribution, advertising, and agency fees. It is also more secure and convenient since the internet can be accessed anytime and not on working hours.
3.0 WORKFORCE DIVERSITY AND CONTINGENT WORKFORCE AS IMPORTANCE CHANGES IN TODAY’S WORKPLACE
Workforce diversity can generally be described as demographic differences in a workplace. The increasing diverse demography, coupled with a growing global economy, is forcing organizational readiness for effective business alignment strategies to achieve growth, profitability and sustainability (Martino, 1999; Wheeler, 2001; Fitzpatrick, 1997; Mc Bride and Bostian, 1998).
Contingent workforce constitutes of workers who are not permanently employed in the organization they work for/in (Connelly and Gallagher, 2004; Gallagher and McLaean Parks, 2001). Renewed interest in contingent workforce was driven by sheer rise in numbers of part-time and contracted employees since the 1980s (Tilly, 1991) and the impact of this individuals in workplace (Jacofsky and Peters, 1987; Wakefield et al., 1987).
Current rise in Workforce diversity and contingent workforce has brought major changes in workplace. For instance, more than 85 percent of the US Fortune 1,000 companies downsized in the period 1987-1991 (Cameron et al, 1991). Management structures have become flatter, with fewer layers under top hierarchies and substantial loss of middle managers (Hecksher, 1995). These forces can be both a threat and an opportunity to the workforce (Hatfield and Sprecher, 1984; O’Reilly and Chatman, 1986).
The most evident measurable benefit of workforce diversity includes improved bottom line – according to a 2001 survey by the Society for Human Resource Management and Fortune Magazine, workforce diversity helps companies to maintain a competitive edge (SHRM, 20010), competitive advantage - diversity helps organizations to maintain a competitive advantages through improving corporate culture, improving employee morale, higher retention of employee and easier recruitment of new employee (McCornack, 2002, p. 1), and superior business performance – demographic diversity in senior management teams correlates with superior business performances in worker productivity, net operating profits, gross revenues, total assets, market shares, and shareholder value (Bureau of National Affairs, 1998). When companies don’t make diversity their priority, it can lead to loss of potential business, since customers are proving increasingly loyal to companies that understand their culture and their needs (Diversity Inc, 2002; WCC/HA, 2002). This specifically shows how diversity can be an opportunity to organization towards maintaining brand image and closer customer relationship.
On the other hand, contingent workforce can be of threat to organization because of changes in their job attitudes – contingent workers who receive the least pay and work on less motivating job are less likely to have a positive attitude (Albion, 2004; Ellingson et al., 1998; Isaksson and Ballagh, 2002), and turnover – contingent workers are seen as having low-skill with few benefits, and this can lead to job dissatisfaction. Turnover can be seen as natural consequences of job insecurity and dissatisfaction (Jacofsky and Peters, 1987). In addition, it is difficult to compare productivity of full-timers to that of part-timers in workplace because of differences in amount of training received (Virtanen et al., 2003). Business turnover is a great threat to any organization since it incurs cost of new recruitment, cost of new training and loss of experienced workers.
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