E-business and SME companies

Globalization is a process that has a tendency for a universality of the world in: economic, cultural, social and others aspects.  Economic globalization aims to create a single world market in almost all industries, where markets are not separated by geographic barriers and business cannot be successful without the use of modern information technology. During the nineties, the arrival of World Wide Web on the Internet for the first time empowered easy work online, easy and cheap to publish and broadcast information. That enabled the various forms of business to become cheaper to conduct, so even small companies got the possibility of using electronic commerce. Democratization of operations   gives a chance to for small and medium enterprises reach the global markets.  To use computers and networks was no longer a privilege of the rich and big companies; with new technologies the race for global market share became possible even for the smallest businesses. Today it is a risk for any serious company not to be in global internet markers, no matter how big that company is.

Networking companies and public administration under the influence of rapid growth internet technologies have changed the process, productivity and business systems. This change allows simple communication almost immediately, transferring large amounts of data over long distances, easily publish and update multimedia documents and their continued global availability, delivery of digital goods and services, direct payments via the Internet, creating a virtual organization, etc. All these elements are elements of the new business forms, called electronic commerce. Electronic commerce is a general concept that involves all forms of business transaction or information exchange that is performed by using information and communication technologies.

In modern business one of the most important communication media and source of business information is the Internet; from the world of computer networks it has developed into the world’s largest collection of human knowledge, with ability to connect all parts of the world,  internet becomes  one big market with more than a billion potential customers. Because of that it is crucial for SMEs to restructure its current and adopt the e-business strategy.

Small and medium enterprises (SMEs) are defined and classified differently based on a number of criteria including: number of employees, size of transactions, size of capital assets, etc. The most popular criterion is the number of employees’ (NOE) in the company. Most of the national accounting system defines SMEs as those with the number of employees in the range of 1-500. This can be further subdivided into: micro enterprises with NOE <5, a small company with 5 ≤ NOE <20 and medium enterprises with ≤ 20 NOE <. For example, in the manufacturing sector NOE for small businesses can be around 200, compared to about 20 for a similar category in the service sector. The SME sector is generally recognized as an opportunity for rebuilding of mature industries, with chance of creating new and innovative markets.

Availability of Internet and Web technology provides unique opportunities for small and medium enterprises to build an effective global business. Internet infrastructure is relatively cheap and can be effective for SMEs access to a huge mass of customers in e-commerce.

This means that e-business is an extremely attractive option for most SMEs, especially because of the huge amount of support provided by the government for growth in this sector. Also, the unique characteristics of small businesses, such as: operation flexibility, relatively simple organizational structure, company culture and a high tendency to engage in the business network can be advantageous in the electronic market. Business communications have become global even for small businesses. However there are some dangers, most of SMEs have little experience in doing business in the global market and rarely has formal procedures for strategic planning and management. This combination of limited exposure to the online market and slow transfer of modern IT technologies makes e-business intimidating choice for most SMEs

E-business strategies define all business processes that have the ultimate goal of customer satisfaction and company profits. However, to achieve the goal of e-business, you need to create and sustain operational processes that are essentially electronic business. The strategy defines the future direction of the organization or part of an organization. The strategy is a planned decision on the basic ways for achieving the goals in the business.

It is essentials to make a distinction between corporate strategy and e-business. Usually, most companies that come from the traditional economics are creating an e – business strategy as a part of the corporate strategy and derive from it, but achieving the objectives of e-business strategy is a part of corporate goals. The strategy is defined on the basis of the vision, mission and goals asked, that’s why is necessary constantly to monitor and measure the level of achievement of objectives in order to determine the validity of the strategy.

 The Strategy Image

The e-business strategy of the company primarily depends on two factors: nature of the company and positioning e-business on the market.

The nature of the company is determined by the amount of actuality created a business based on Internet technology. According to that standard, it is possible to distinguish the following groups:

  • “Dot. Companies“are created because of the fast development of the Internet, computer and telecommunication technologies.  Primarily its mission, vision and goals are based on these technologies, the main strategies of e-business is on these companies is known as“dot. Com strategy. These companies are, for example; providers, commercial and other including Yahoo, AltaVista, EBay, Google, Amazon.com, etc.
  • Traditional companies that operate according to traditional models can be present to a greater or lesser level, or not represented at all Internet business models. Such companies are mostly concerned with the elements of grand strategy oriented towards the Internet and have an e-business strategy at lower levels, for example, the strategy of a business unit or one of the functional strategies. There are many companies that operate according to traditional models and online activities.

Virtual organizations have specific strategies that are principally, viewed from a technological point of view, based on Internet technologies and thus have the characteristics of e-business strategies. Starting from an e-business strategy in the structure of the company, it should be said that they have a special role and importance in the desired position of a company in the region. The role of strategy in general, including the e-business strategy is multiple, which is reflected through:

  • Direction-finding (they are guiding the company);
  • Integration of resources (to achieve synergies of companies);
  • Platform ( common plans, programs and activities of the company in a given period of time);
  • Landmark  (observation and evaluation of political and business activities of the company in relation to the purpose);
  • Forecasting (estimate changes in the business and other external environments, and to estimate the position of the company according to external influence)

Advantages and disadvantages of e-business for SMEs

As main advantages / benefits of electronic commerce for SMEs, there are:

• Reducing transaction costs – if the e-business is well-designed,

• Continuum and virtually unlimited access to the world market,

• Income growth, production, employment,

• Market offers a different way of shopping – adding to the traditional shopping companies complement their product offerings through the concept of “shopping from home-where electronic commerce is the most comfortable way of shopping,

• Innovative products and business models,

• Wide product catalogs – companies have an opportunity to present a very wide range of products, which is difficult in the traditional ways of selling, as an example in this regard is often held up where Amazon is offering three million books,

• Improving the interactive relationships with customers, IE is adapting products and services to customers, which provides a competitive advantage,

• To reduce inventory and costs through procurement management,

E-business requires from company to look for new forms of risk as part of their business strategy, with the traditional risks in the business, it should part of an overall strategy. The biggest risk is a possible attack by hackers or viruses; it does not cause physical damage. It will result in big costs related to bringing the system back to a previous state, damage done to the company image which will reflect to confidence among customers. At the end it could bring legal issues, possible compensation claims from injured clients on the basis of the responsibility of the company.

Benefits for consumers: allows purchases or other transactions 24 hours a day, consumers have more choice, provides affordable products and services for consumers, allowing them to buy in many places, quick delivering of products and services, especially digital, consumers can receive relevant and detailed information within seconds, allows participation in virtual auctions, allows consumer interaction, exchange of ideas and experiences, facilitates competition which results in significant reductions.



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