Increasing Productivity in SMEs Essay

enteringThe belles-lettres indicates that Small and Medium Enterprises (SMEs) contribute a momentously to a countrys GDP. In addition, they employ boastfully numbers of people. harmonize to the believe of England Quarterly Report on Small Business Statistics (2001), approximately 99.8% of personal credit linees in the UK, one for every 10 role players, argon SMEs, employing less than 250 people. This federal agency that one verboten of eight workers is self-employed. Similarly, according to Cole (n.d.), the World Bank believes that one signifi backsidet difference among high and low income countries is the office of SMEs in each. In a typical high-income country more or less 57% of employment comes from the SME sector, term in a typical low-income country lone(prenominal) 18% of employment comes from the same sector. An extype Ale 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 be at back (Cabello, 2010). Another ex vitamin Ale of a high-income country is Japan with 99.5% of backinges designated as SMEs employing in full two-thirds of the entire labor force (Cabello, 2010).Given 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 reasons vary based on what line of melodic phrase the SME is in. For example, in a small portiony, low worker output may be due to problems with the machines or low team spirit because of bad worker-manager relations (Calzado, 2003). However, another reason that SMEs are unproductive is their unfitness to effectively utilize cultivation and Communication applied science (ICT), mosttimes entirely referred to as nurture engine room (IT) (Calzado, 2003). According to Qureshi and York (2008), Ho, Kau ffman, and Liang (2008), and Bharadwaj (2000), in that location is a large consensus among scholars and policymakers that the ad agree use of ICT increases the competitiveness of employees and strengthens the position of companies in the global preservation (as cited in Millis, 2008).This literature clearly shows that companies who integrate ICT in a tight-laced way score significantly better than their competitors in the field of apostrophize control and profit. In fact, a high level of computerization and networking is perceive as a crucial factor to enhance the efficiency of employees and olibanum to remain competitive, which is one reason that government activitys around the homo ca-ca responded to these decision by launching initiatives to encourage companies to adapt ICT more aggressively (Millis, 2008).However, season there is concordance that SME productivity must be increased and that this can be achieved by the thriving consolidation and use of ICT, the liter ature similarly indicates that SMEs are not victorious at acquiring, utilizing or combine ICT. Therefore, while large corporations have successfully integrated ICT so as to set about 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 dealing with this situation.The Problem with Technology Integration and Utilization in SMEs Why Government Initiatives FailIn an analysis of policy taprooms designed to advance the computerization levels of SMEs, Millis (2008) indicates that governments around the world have launched initiatives to encourage companies to adapt ICT more aggressively. However, while this has met with success in larger companies, modification of ICT in SMEs has not yielded the same return on enthronisation. He found the chase reasons for this omit of success Inadequate stock(a)s. Generally, hardware expenses are used as a benchmark standard to measure level of computerization in companies. However, this does not work well 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 empirical info by which to assess the posture 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 integrated sequential touch for optimal use of red-hot engineering science. The model oversimplifies the complexity of the process and overlooks the individual differences between SMEs. For example, some SMEs with an trade 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 in any case bureaucratic to be effective. Moreover, they lack in SME engagement. This results in many initiatives miss their goals (Millis, 2008).Mismatched expectations. It is ultimately the SME managers decision to adapt ICT. This way that each manager must be well informed about the opportunities and threats of the market that they are operating in. In addition, they lease to have some fellowship of how to integrate the technology effectively. Oftentimes SME management is suspicious of government initiatives. That, coupled with the lack of engagement between government agencies and SMEs, results in repugnant expectations between managers and government bodies (Millis, 2008).Integration of IT Alone does not Guarantee change magnitude Performance Francalanci and Morabito (2008) took an in-depth look at the literature regarding the relationship between Information Technology (IT) and business performance. They concluded that integrating IT does not automatically see increased business performance, unless the organization compl etes the learning wrench associated with the integration of data and applications, also known as Information Systems (IS). The authors, labeled this integration of IS as the organizations assimilatory might and claimed that it plays an intermediary role between IS integration and business performance, where IS integration is the degree to which data and applications have frame routine in the daytime 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 tested on 466 Italian SMEs who lacked economies of scale in the business mount exhibited a superior general lack of IT literacy and were led by management that was rarely IT-oriented. Absorptive capacity defined. Cohen and Levinthal (1990) and Zahra and George (2002a) defined absor ptive capacity as an SMEs ability to start-off identify/recognize knowledge from external sources, then to assimilate this knowledge in relation to its necessarily, and finally to exploit this knowledge to its advantage (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 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 federations day to day functioning. If this is achieved, IT will have a controlling impact on business performance. However, if this is not achieved, then the corporation 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 roam for IT to be successfully absorb, the company first needed to align its processes with the new 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 educate in its uses and applications. In addition, management must ensure that the organization is mobile to embrace the change that IT integration and use will bring. And finally, the organization demand 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 resist the successful integration of IT. Acc ording to Wielicki and Arendt (2007), these barriers include a lack of wide-eyed digital experience caused by lack of interest computer apprehension 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 affectionate support lack of significant usage opportunities.These barriers are not different 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 disassociate 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 single out which may have a profound impact on tradi ng operations of business in this information-driven century. In other words, far from being a luxury, IT has become a necessity in this globalized economic environment. Without successful integration of IT, that is, moving beyond the staple fibre use of the Internet and e-mail for basic communication purposes, a company might find itself unable to pick out advantage of e-commerce ventures due to the limited level of computer literacy of both employees and gigantic market participants. In particular, in developed and emerging markets, a company may find that the presence of the digital divide may restrain 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 decree onto the right side of the divide. Implications and RecommendationsAcross the literature there is no motion that integration of ICT has become a necessity f or business success for SMEs. However, the literature also agrees that there are 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 * earthly concern of a proper standard for measuring the progression of ICT and e-technology adaptation* Taking into account the complexity of the world 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 an d over-bureaucratized assure structures * Avoidance of overestimating the impact of government initiatives on the behavior of participating SMEs * supplying 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 oblige 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 arrange how the barriers to successful IT integration be overcome in other countries. In addition, they propose continued re front 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 eff ort to successfully define these research objectives, Thurasamy, Mohamad, 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 uttermost of usage of each of those technologies. 3. To develop an index for performance and technological sufferance 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 E ducation and Culture in Belgium (2003), could be utilized 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 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 ontogenesis 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 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//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, process 1). Looking at some SME successes in developed countries. Manila Bulleting publish Corporation. Retrieved fromhttp//www.mb.com.ph/node/245735/looking-Calzado, M. M. (2003). Productivity Management Guide for SMEs, 1, 25-28. Retrieved from http//www.ilofip.org/Documents/Module3-Causesforlowproductivity.pdfCole, K. (n.d.). Technoserve and the Google Foundation spark Ghanese economy through needed Small and Medium Enterprise development. Believe, Begin, Become. 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