Increasing Productivity in SMEs Essay

IntroductionThe writings indicates that small(a) and Medium Enterprises (SMEs) digest a significantly to a artlesss gross domestic product. In addition, they absorb large numbers of people. fit to the Bank of England Quarterly Report on Small Business Statistics (2001), almost 99.8% of callinges in the UK, one for every 10 leaners, are SMEs, employing less than 250 people. This means that one place of eight workers is self-employed. Similarly, tally to Cole (n.d.), the World Bank believes that one significant difference between soaring and low income countries is the percentage of SMEs in each. In a emblematic high-income state of matter about 57% of employment comes from the SME sector, term in a typical low-income country only 18% of employment comes from the same sector. An role lesson 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 force (Cabello, 2010). A nonher example of a high-income country is Japan with 99.5% of personal credit linees designated as SMEs employing fully two-thirds of the entire labor force (Cabello, 2010). granted the sizeable contributions SMEs make in terms of employment and adding to a countrys GDP, it is tremendously important they increase their competitiveness in a globalized economic environment. Unfortunately, in that respect is significant evidence that SMEs lag in productivitythe proportionatenesss vary based on what line of business the SME is in. For example, in a small portiony, low worker output may be callable to problems with the machines or low morale because of bad worker-manager relations (Calzado, 2003). However, a nonher reason that SMEs are unproductive is their in king to effectively utilize Information and conversation Technology (ICT), sometimes simply referred to as Information Technology (IT) (Calzado, 2003). According to Qureshi and York (2008), Ho, Kauffman, and Liang (2008), and Bharadwaj (2000 ), there is a large consensus among scholars and insurance policymakers that the adequate use of ICT increases the competitiveness of employees and strengthens the sic of companies in the global economy (as cited in Millis, 2008).This literature clearly shows that companies who immix ICT in a proper way score significantly snap off than their competitors in the field of cost control and profit. In fact, a high level of computerization and networking is perceived as a crucial component part to enhance the efficiency of employees and thus to remain competitive, which is one reason that governances or so the world become responded to these finding by launching initiatives to encourage companies to set ICT more aggressively (Millis, 2008).However, while there is agreement that SME productivity must be increased and that this can be achieved by the winnerful desegregation and use of ICT, the literature also indicates that SMEs are non prosperous at acquiring, utilizing or desegregation ICT. Therefore, while large corporations sire thrivingly incorporated ICT so as to generate more output with fewer resources, SMEs have been left behind (Wielicki & Arendt, 2007). Therefore, this paper seeks to investigate the reasons why SMEs do not utilize engineering science effectively and possibly provide some recommendations for transaction with this situation.The Problem with Technology Integration and Utilization in SMEs Why presidential term Initiatives FailIn an analysis of policy measures designed to advance the computerization levels of SMEs, Millis (2008) indicates that political sciences around the world have launched initiatives to encourage companies to adapt 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. He found the undermentioned reasons for this wish of success Inadequate patterns. Generally, hardware expenses are used as a bench m ark standard to measure level of computerization in companies. However, this does not work tumesce in SMEs because some companies rent rather than own hardware, and ownership does not equate with effective usage. This has resulted in a lack of confirmable info by which to assess the durability of government initiatives (Millis, 2008).Oversimplified assumptions and underestimation of SME diversity. solely initiatives to encourage the adaptation of ICT are based on a model that assumes a structured sequential dish for optimal use of bare-ass technology. The model oversimplifies the complexity of the process and overlooks the individual differences between SMEs. For example, some SMEs with an exporting component are better positioned to computerize faster than companies that do not have an export component. As a result of the diversity of SMEs, government initiatives are too bureaucratic to be effective. Moreover, they lack in SME engagement. This results in many initiatives m issing their goals (Millis, 2008).Mismatched expectations. It is ultimately the SME managers conclusiveness to adapt ICT. This means that each manager must be well informed about the opportunities and threats of the market that they are operating in. In addition, they take aiminess to have some knowledge of how to integrate the technology effectively. Oftentimes SME solicitude is suspicious of government initiatives. That, coupled with the lack of engagement between government agencies and SMEs, results in mismatched expectations between managers and government bodies (Millis, 2008).Integration of IT Alone does not Guarantee Increased Performance Francalanci and Morabito (2008) took an in-depth look at the literature regarding the kindred between Information Technology (IT) and business performance. They concluded that integrating IT does not automatically guarantee increased business performance, unless the organization completes the learning twine associated with the desegr egation of data and applications, also known as Information Systems (IS). The authors, tagged this desegregation of IS as the organizations absorptive mental ability and claimed that it plays an go-between role between IS integrating and business performance, where IS integration is the degree to which data and applications have become routine in the solar day to day activities of an organization.Therefore, the authors hypothesized that IS integration leads to greater business performance through absorptive capacity, that is, that absorptive capacity has a mediation role in how a business performs (Francalanci & Morabito, 2008, p. 298). The hypothesis was tried on 466 Italian SMEs who lacked economies of scale in the business reach exhibited a general lack of IT literacy and were led by management that was rarely IT-oriented. absorbent capacity defined. Cohen and Levinthal (1990) and Zahra and George (2002a) defined absorptive capacity as an SMEs ability to first identify/rec ognize knowledge from external sources, then to slang this knowledge in relation to its inescapably, and finally to exploit this knowledge to its expediency (as cited in Francalanci & Morabito, 2008). This might include the ability to imitate competitors products or processes, or to exploit less commercially focused knowledge (e.g., scientific look into or IT solutions).Integrating anything external requires a learning plication 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 conjunctions day to day functioning. If this is achieved, IT will have a collateral impact on business performance. However, if this is not achieved, then the alliance 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 differentiate for IT to be successfully clothed, the company first needed to align its processes with the crude IT in order for it to result in the desired increase in efficiency.Next, the company needed to make sure that all IT users were sufficiently train in its uses and applications. In addition, management must ensure that the organization is pose to embrace the change that IT integration and use will bring. And finally, the organization call for to display flexibility in adapting to the new IT integration so that there is little loss of time and cost. However, if a company has management that is not IT oriented or that is unwilling 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 even after an investment in IT.The Digital DivideWielicki and Arendt (2007), agree with Francalanci and Morabito (2008) in their findings as to what barriers hold the successful integration of IT. According to Wielicki and Arendt (2007), these barriers in clude a lack of primary(a) digital experience caused by lack of interest computer misgiving 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 kind support lack of significant usage opportunities.These barriers are not unlike 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), constitute the digital start between SMEs and larger companies that have successfully and willingly adopted and absorbed IT to increase their competitive advantages.According to Wielicki and Arendt (2007), it is the failure to understand the digital mete out which may have a profound impact on operations of business in this information-driven century. In other words, far fro m being a luxury, IT has become a necessity in this globalized economic environment. Without successful integration of IT, that is, moving beyond the underlying use of the Internet and e-mail for basic communication purposes, a company might find itself unable to wee-wee advantage of e-commerce ventures due to the limited level of computer literacy of both employees and bounteous market participants. In particular, in developed and emerging markets, a company may find that the presence of the digital divide may thwart it from appreciating the benefits of technology-driven opportunities. As a result, the dynamic growth of the e-commerce economy could turn out to be somewhat deceiving unless we can move more businesses and more of purchase order onto the right side of the divide. Implications and RecommendationsAcross the literature there is no mistrust that integration of ICT has become a necessity for business success for SMEs. However, the literature also agrees that there ar e many barriers in the way of successful absorption and effectuation 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 involvement 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 suggestions about how government should proceed * universe of discourse of a proper standard for measuring the progression of ICT and e-technology adaptation* Taking into account the complexity of the globe and circumstances in SMEs that prevent computerization proceeding as a structured, sequential process. * Taking into account that a holistic approach to IT integration cannot work because of the large diversity between SMEs * Avoidance of high-level approaches and over-bureaucratized travail structures * Avoidance of overestimating th e impact of government initiatives on the behavior of participating SMEs * prep 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 compel on the company be the government Another recommendation comes from Wielicki and Arendt (2007).Since the US is the most advanced country with regard to IT use and integration, they suggest that it be used as a model of study to conciliate how the barriers to successful IT integration be overcome in other countries. In addition, they proponent continued re lookup to track the progress of SMEs in crossing the business digital divide, tracking the level of implementation of ICT-based solutions at the business process level and the role of ICT training in SMEs or of ICT in integrating business processes of SMEs. In an effort to successfully define these interrogation objectives, Thurasamy, M ohamad, Omar, and Marimuthu (2009), have proposed an empirical study across 1500 Malaysian SMEs in order to determine the following 1. To profile the type of technologies adopted by SMEs.2. To profile the finale of usage of each of those technologies. 3. To develop an index for performance and technological word sense tracking of SMEs. 4. To investigate factors that encourage, as well as those that remain barriers to technology adoption.5. To establish 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 further research into IT integration in SMEs. Another reason cited for the unsuccessful adaptation of IT was lack of employee training. Therefore, government initiatives like the ones featured in a report released by the Directorate-General for Education and Culture in Belgium (2003), could be utilized towards incr easing the effectiveness of employees in relation to the use and adaptation of IT. The report profiles 10 European employee training programs ranging from Worldwide 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 evolution economies. While this need has been documented 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 employment and business opportunities for those with the necessary know-how and skills to offer their services as consultants and trainer s 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//webcache.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 Publishing Corporation. Retrieved fromhttp//www.mb.com.ph/node/245735/looking-Calzado, M. M. (2003). Productivity Management show 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 needed Small and Medium Enterprise development. Believe, Begin, Become. 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