Increasing Productivity in SMEs Essay

IntroductionThe writings indicates that mild and fair Enterprises (SMEs) contribute a probatoryly to a orbits GDP. In gain, they employ large numbers of people. jibe to the Bank of England Quarterly Report on sensitive Business Statistics (2001), almost 99.8% of billetes in the UK, one for every 10 recreateers, ar SMEs, employing less than 250 people. This means that one tabu of eight workers is self-employed. Similarly, according to Cole (n.d.), the earth Bank believes that one pregnant end among high and hapless income countries is the division of SMEs in each. In a characteristic high-income orbit approximately 57% of credit line comes from the SME sector, dapple in a representative low-income country only 18% of barter comes from the same sector. An example of a high-income country is the US, with 85% of companies designated at SMEs, contributing 50% of the GDP and employing 50% of the labor suck up (Cabello, 2010). A nonher example of a high-income c ountry is Japan with 99.5% of line of credites designated as SMEs employing fully two-thirds of the integral labor force (Cabello, 2010).Given the healthy contributions SMEs make in terms of employ and adding to a countrys GDP, it is staggeringly strategic they change magnitude their competitiveness in a orbiculateized economic environment. Unfortunately, on that point is signifi substructuret evidence that SMEs lag in productivitythe moderatenesss vary based on what business organization of business the SME is in. For example, in a small- shell factory, low worker output may be due to problems with the machines or low morale beca sub figure of bad worker- theatre director coincidences (Calzado, 2003). However, a nonher(prenominal) reason that SMEs are unproductive is their inability to effectively utilize know conductge and colloquy Technology (ICT), several(prenominal)times simply referred to as Information Technology (IT) (Calzado, 2003). tally to Qureshi and York (2008), Ho, Kauffman, and Liang (2008), and Bharadwaj (2000), in that location is a large consensus among scholars and insurancemakers that the adequate usance of ICT increases the competitiveness of employees and streng and thens the position of companies in the global saving (as cited in Millis, 2008).This literature all the way shows that companies who integrate ICT in a strait-laced way score significantly break d familiarity than their competitors in the field of cost hold back and profit. In fact, a high train of info processing systemization and networking is perceived as a crucial factor to enhance the strength of employees and thus to remain competitive, which is one reason that pre stancential terms close to the world exhaust responded to these purpose by launching initiatives to advertize companies to fit ICT more than aggressively (Millis, 2008).However, while at that place is agreement that SME productivity must be change magnitude and that t his can be get throughd by the roaring consolidation and usage of ICT, the literature too indicates that SMEs are not succeederful at acquiring, utilizing or integrate ICT. Therefore, while large corporations have madely incorporated ICT so as to generate more output with fewer resources, SMEs have been left(a) behind (Wielicki & Arendt, 2007). Therefore, this paper seeks to investigate the reasons wherefore SMEs do not utilize technology effectively and possibly provide several(prenominal) recommendations for dealing with this situation.The Problem with Technology desegregation and Utilization in SMEs Why authorities Initiatives FailIn an compendium of policy measures designed to advance the cybernation levels of SMEs, Millis (2008) indicates that government activitys around the world have launched initiatives to encourage companies to admit ICT more aggressively. However, while this has met with success in larger companies, adaptation of ICT in SMEs has not yielded the same return on investment funds. He found the following reasons for this inadequacy of success Inadequate beats. Generally, hardware expenses are employ as a benchmark standard to measure level of computerization in companies. However, this does not work rise up in SMEs because some companies rent rather than own hardware, and ownership does not equate with effective usage. This has impressioned in a neglect of experimental data by which to assess the authorization of government initiatives (Millis, 2008).Oversimplified assumptions and underestimation of SME diversity. All initiatives to encourage the adaptation of ICT are based on a model that assumes a structured sequential act for optimal use of sweet technology. The model oversimplifies the complexness of the process and overlooks the individual differences between SMEs. For example, some SMEs with an merchandise component are better positioned to supply faster than companies that do not have an export co mponent. As a result of the diversity of SMEs, government initiatives are in like manner bureaucratic to be effective. Moreover, they drop in SME engagement. This results in many initiatives missing their goals (Millis, 2008). match expectations. It is ultimately the SME managers finale to adapt ICT. This means that each manager must be well aware about the opportunities and threats of the market that they are in operation(p) in. In addition, they need to have some knowledge of how to integrate the technology effectively. oftentimes SME care is suspicious of government initiatives. That, linked with the omit of engagement between government agencies and SMEs, results in mismatched expectations between managers and government bodies (Millis, 2008).Integration of IT Alone does not promise Increased Performance Francalanci and Morabito (2008) took an in-depth look at the literature regarding the relationship between Information Technology (IT) and business doing. They conclu ded that integrating IT does not automatically guarantee increased business performance, unless the organization completes the larn slew associated with the integrating of data and applications, also know as Information Systems (IS). The authors, labeled this consolidation of IS as the organizations sorbefacient capacity and claimed that it plays an intermediary role between IS integration and business performance, where IS integration is the deliver to which data and applications have become routine in the twenty-four hour period to day activities of an organization.Therefore, the authors hypothe size of itd that IS integration leads to greater business performance through and through shock-absorbent capacity, that is, that absorptive capacity has a mediation role in how a business performs (Francalanci & Morabito, 2008, p. 298). The hypothesis was tested on 466 Italian SMEs who lacked economies of scale in the business scene exhibited a general lack of IT literacy and w ere led by management that was rarely IT-oriented. absorbefacient capacity coifd. Cohen and Levinthal (1990) and Zahra and George (2002a) defined absorptive capacity as an SMEs ability to primary identify/recognize knowledge from extraneous sources, then to assimilate this knowledge in relation to its needs, and finally to exploit this knowledge to its advantage (as cited in Francalanci & Morabito, 2008). This baron take the ability to imitate competitors products or processes, or to exploit less commercially rivet knowledge (e.g., scientific research or IT solutions).Integrating anything external requires a shootment curve on the part of the entity attempting its integration. Since IT is a complex technology, it too requires a learning curve so that data and applications may be effectively integrated with the familiaritys day to day functioning. If this is achieved, IT leave behind have a positive carry on on business performance. However, if this is not achieved, then the union not only does not perform better, but also fails to achieve a return on its investment in the IT. Francalanci and Morabito (2008) found that in rewrite for IT to be roaringly absorbed, the company commencement ceremony undeniable to align its processes with the new IT in order for it to result in the coveted increase in efficiency.Next, the company needed to make sure that all IT substance abusers were sufficiently trained in its uses and applications. In addition, management must ensure that the organization is localize to embrace the change that IT integration and use will bring. And finally, the organization needs to pageant flexibility in adapting to the new IT integration so that there is little passage of time and cost. However, if a company has management that is not IT oriented or that is averse to train its employees in IT use, then the absorptive capacity of the company is low resulting in little or no increase in business performance level(p) after a n investment in IT.The digital DivideWielicki and Arendt (2007), agree with Francalanci and Morabito (2008) in their findings as to what barriers continue the successful integration of IT. match to Wielicki and Arendt (2007), these barriers include a lack of wide-eyed digital experience caused by lack of interest computer anxiety and unattractiveness of the new technology lack of computers and network connections lack of digital skills caused by insufficient user friendliness and inadequate education or social arrest lack of significant usage opportunities.These barriers are not mingled from the characteristics of the 466 SMEs chosen by Francalanci and Morabito (2008)lack of economies of scale in the business setting lack of IT literacy and management that was not IT-oriented. It is these barriers that, according to Wielicki and Arendt (2007), key the digital select between SMEs and larger companies that have successfully and willingly pick out and absorbed IT to increase th eir competitive advantages.According to Wielicki and Arendt (2007), it is the failure to understand the digital divide which may have a dim seismic disturbance on operations of business in this information-driven century. In other words, farther from being a luxury, IT has become a necessity in this globalized economic environment. Without successful integration of IT, that is, moving beyond the radical use of the Internet and e-mail for base communication purposes, a company might find itself unable to take advantage of e-commerce ventures due to the limited level of computer literacy of both employees and broad market participants. In particular, in veritable and emerging markets, a company may find that the straw man of the digital divide may proceed it from appreciating the benefits of technology-driven opportunities. As a result, the dynamic appendage of the e-commerce economy could turn out to be somewhat deceiving unless we can move more businesses and more of societ y onto the right side of the divide. Implications and RecommendationsAcross the literature there is no doubt that integration of ICT has become a necessity for business success for SMEs. However, the literature also agrees that there are many barriers in the way of successful submerging and implementation of ICT in SMEs. In addition to the widespread agreement on these two points, the literature also provides proposals and recommendations for overcoming the barriers. One important factor in creating solutions is government matter due to the lack of financial resources on the part of individual SMEs. However, one size does not fit all, and Millis (2008) provides the following proposeions about how government should proceed * launching of a proper standard for measuring the advance of ICT and e-technology adaptation* Taking into account the complexity of the reality and circumstances in SMEs that prevent computerization proceeding as a structured, sequential process. * Taking int o account that a holistic approach to IT integration cannot work because of the large diversity between SMEs * turning away of high-level approaches and over-bureaucratized project structures * Avoidance of overestimating the impact of government initiatives on the behavior of alive(p) SMEs * Provision of direct and specific support to SMEs designed to elicit concrete results * Creation of realistic and measurable goals and models that support the choices of the company rather than something generic that is imposed on the company be the government some other recommendation comes from Wielicki and Arendt (2007).Since the US is the most right country with regard to IT use and integration, they suggest that it be used as a model of see to determine how the barriers to successful IT integration be overcome in other countries. In addition, they counsel keep research to track the progress of SMEs in crossing the business digital divide, introduce the level of implementation of ICT- based solutions at the business process level and the role of ICT raising in SMEs or of ICT in integrating business processes of SMEs. In an effort to successfully define these research objectives, Thurasamy, Mohamad, Omar, and Marimuthu (2009), have proposed an semiempirical study across 1500 Malaysian SMEs in order to determine the following 1. To visibility the type of technologies adopted by SMEs.2. To write the extent of usage of each of those technologies. 3. To develop an index for performance and technological acceptation tracking of SMEs. 4. To investigate factors that encourage, as well as those that remain barriers to technology adoption.5. To defecate the extent of technology adoption and performance (financial and non-financial) plus Internationalization.As we can see, the objectives of this study mirror the suggestions of Wielicki and Arendt (2007) as to the nature of kick upstairs research into IT integration in SMEs. other reason cited for the unsuccessful ad aptation of IT was lack of employee training. Therefore, government initiatives like the ones featured in a report released by the Directorate-General for procreation and Culture in Belgium (2003), could be employ towards increasing the effectiveness of employees in relation to the use and adaptation of IT. The report profiles 10 European employee training programs ranging from piecewide web-based information and communication technologies training for manufacturing SMEs to a compact disc read-only memory based program to help SMEs define their training needs.ConclusionAs can be seen from the above discussion, there is a definite need to foster the integration of IT/ICT in SMEs in both developed and developing economies. While this need has been authenticated by the literature, it is also clear that there are many obstacles that stand in the way of the successful implementation of the technology. It would seem, therefore, that the stage is set for further investigation into the technological and educational needs of SMEs around the world. It would also seem that there are economic consumption and business opportunities for those with the necessary know-how and skills to offer their serve as consultants and trainers to SMEs desiring to integrate IT/ICT into their day to day activities.ReferencesBank of England Quarterly Report on Small Business Statistics. (2001, January). Retrieved from http//web stash.googleusercontent.com/search?q=cacheJvJUI7yMYv8Jwww.accaglobal.com/pdfs/smallbusiness/EESME.doc+SME+percentage+of+GDP&cd=1&hl=en&ct=clnk&gl=usCabello, N. (2010, March 1). Looking at some SME successes in developed countries. Manila Bulleting issue Corporation. Retrieved fromhttp//www.mb.com.ph/node/245735/looking-Calzado, M. M. (2003). Productivity Management expire for SMEs, 1, 25-28. Retrieved from http//www.ilofip.org/Documents/Module3-Causesforlowproductivity.pdfCole, K. (n.d.). Technoserve and the Google Foundation spark Ghanaian economy through nee ded Small and Medium Enterprise development. 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