The main aim of the research study was to critically assess the impact of the internet on SMEs in the United Kingdom. The study embraced the descriptive survey design to explain the impact of the internet on SMEs in the UK. The study found that the use of internet among SMEs has created many job opportunities for the people of United Kingdom. There is more consumer awareness of the products available in the market and the online shopping had greatly improved. The study recommends that the policymakers to come up with a policy that can encourage the use of internet among SMEs as a way of creating job opportunity and propelling the economy. The study concluded by suggesting for further study to investigate factors hindering the use of internet among SMEs in the United Kingdom.
Acknowledgment
I want to sincerely thank everybody who contributed to the success of this project. The success and final outcome of this research study required guidance and assistance from my supervisor and other members of the department. I was privileged to get this assistance at the best opportunistic time. I want to categorically thank my supervisor for guiding me through this project despite having a strict schedule in the office.
Table of Contents
Chapter One: Aims, Objective, and Rationale of the Study. 5
Chapter Two: Literature Review.. 7
Chapter Three: Research Methodology. 12
Chapter Four: Research Findings. 15
Chapter Five: Research Analysis. 16
Chapter Six: Limitation of the Study. 21
Chapter Seven: Conclusion and Recommendations. 22
Appendices. 23
Reference List 25
A Critical Assessment of the Impact of the Internet on SMEs within the UK
Chapter One
Introduction
This chapter presents an overview of the aims and objectives of the study on the impact of the Internet on SMEs in the United Kingdom. The Internet is defined as the global computer network that links devices using internet protocols in the world (Hayes and Babu 2004, p. 69). With the increased integration of the economies of the world, businesses have embraced the Internet in the portfolios. The Internet has drastically changed how businesses are conducted globally. The Internet offers a competitive edge in the global market as it creates a platform where buyers and sellers interact as well as creates supply chain collaborations. The commercialization of the Internet among SMEs has opened many business opportunities around the globe. Small and medium enterprises (SMEs) are playing a very crucial part in the development of the United Kingdom. The previous research shows that SMEs employs 70% of the working population in the United Kingdom (Papazoglou 2008, p. 24; Frankel and Gervais 2016, p. 24). The SMEs have tremendously exploited the Internet power thereby improving their competitive edge in the local and international market. The fundamental concern of this study is to explore the genuine and feasible internet opportunities available for the SMEs in the United Kingdom. This study is limited to SMEs in the United Kingdom because of their tremendous contribution to the economy. For instance, unlike the private companies in the UK that only employs 35% of the working population, SMEs doubles that number and therefore there is need to improve the performance in the SMEs sector (Al-Qirim 2004, p. 17; Aspray and Ceruzzi 2008, p. 131). The research paper main purpose is to review the theories and that can be a basis for the adoption of the internet among the SMEs.
Advancement in technology provides great benefits to the business organizations as well as problems (Shareef 2009, p. 17). Information technology is of great importance in the increasingly global world. Small, medium and large businesses require information in order to remain relevant in this rapidly changing environment. Both the consumers’ tastes and preferences change every day and therefore businesses need to seek and process data in order to survive in the industry.
Problem Statement
The Internet is a vital tool for businesses in both developed and the developing economies. With the use of the Internet, the businesses are able to advertise their products, attain information and communicate with the customers (Lindstrand, Johanson and Sharma 2006, p. 36). The social network platform creates an interactive session between the business, the suppliers and the customers. The business is, therefore, able to respond in real time the issues raised by both the suppliers and the customers. New and existing businesses find it a challenge to penetrate the market in the social network platform. There increasing SMEs in the business world and the use of the internet cannot actually analyse the cost of launching such products in the online platform. In addition, the narrative that social platform is prone to cybercrime and hacking has created a gap in understanding the actual benefit that SMEs and other business can derive from the use of the internet (Rezaei, Dana and Ramadani 2017, p. 40; Muenjohn and McMurray 2017, p. 31). This research paper, therefore, aims to bridge this gap by finding the real benefit to the SMEs on the use of the Internet. Previous researchers have also concentrated on the use of internet in SMEs but have not researched on the impact of the internet on the SMEs. This paper will critically assess the impact of the use of internet on SMEs in the United Kingdom.
Research Questions
This research study aims to address the following questions:
1. To what extent is genuinely and feasibly are the opportunities available for the use of internet among SMEs?
2. What are the issues and challenges the use of internet brings for SMEs?
3. What is the cost of using the internet among SMEs?
4. What is the benefit of using the internet among SMEs?
This research study is guided by the following objectives:
1. To assess how genuine and feasible opportunities of the internet are for SMEs.
2. To assess the issues and challenges they bring about for SMEs.
3. To establish the cost of using internet for SMEs
4. To find out the benefit of using the internet for SMEs.
The significance of the study
This research study is important for SMEs policymakers in the United Kingdom as it will enable them to know the opportunities available for SMEs in the country (Rialp and Rialp 2009, p. 21). It will also be important for the UK government in allocating resources to SMEs having understood the real contribution of the SMEs sector to the country’s gross domestic product. This study will also be valuable to future researchers who would be like to conduct a study in the same field. It can also be stored in the University library to be used by students who will be carrying out similar studies.
The Scope of the Study
The study only concentrated on the SMEs in the United Kingdom. Due to limited time and resources, the research was limited to the use of the Internet among SMEs in the United Kingdom and the study did not investigate the situation of other countries but only made reference to some of them. To this end, the study focused on the small and medium and did not examine the effects or impact of the internet on the private or larger businesses.
Chapter Two
Literature Review
Introduction
This chapter introduces the relevant theories of the impact of the internet on SMEs within the United Kingdom. Their relationship and implementation of the policies of the internet on SMEs. Further, the chapter also reviewed the related literature on the financial opportunities, how the Internet has brought about the 24hour economy and the cost of doing the business in the United Kingdom. This chapter has both the theoretical and empirical literature reviews on the use of internet on SMEs.
Theoretical Literature Review
The Origin of the Internet
In this research study, the word Internet refers to WWW, the Internet, and emails that are associated with technology and application domain (Consalvo and Ess 2013, p. 42). The Internet started as a tool for an individual dated back to 1960s when the United States Defence Department established a project to link various research institutions and military camps. The project developed a protocol Transmission Control Protocol (TCP) that allowed the dissimilar computer systems to communicate. In the 1980s, the National Science Foundation (NSF) used this TCP to expand its own net called the NSFNET.In 1991; full commercial of the Internet was realized with the establishment of commercial internet exchange (Matthews and Ross 2014, p. 46; Luther 2013, p. 1582). This situation led to the beginning of the commercial sites that has remained the fastest growing internet today. According to Lotter (2005, p. 55), the Internet has explosively grown from 1,0000 networks in 1992 to 488,000 networks in 1996.The global growth on the internet continues to surge at an alarming rate. Today, individuals, firms, organizations regardless of the size add incremental benefit to the network.in 1995, the International Data Corporation estimated that there were 38million users of the internet in 150 countries who were researching, communicating and shopping online (Audretsch, Lehmann, Link and Starnecker. 2012, p. 22).
The Stage Theory
The theory states that elements of a system move in distinct stages over time. According to this theory, businesses started in a smaller size but with time they grow larger. Internet likewise started as an individual project for a small business for only sending emails, with time companies started using the internet to pass interdepartmental information then the organizations build their websites and now there are so many businesses that are online (Stöttinger, Schlegelmilch, and Zou 2015, p. 26). The theory explains that internet evolved to become a greater asset that businesses use in order to improve their turnover. In the past, SMEs were characterized by failure to take full control of the environment in which they operate. They could not prevent entry of new firms to the industry and they were generally small or family owned. The theory explains that SMEs have also evolved through stages and have become the employer of many people. Some researchers argue that SMEs avoided complicated software application of fear of cost and the ability to use such applications (Gilbert, Kirkilionis and Nicolis 2013, p. 17). The SMEs chose a sequence of adoption of the internet in their businesses which over time has improved the customer relation and coordination with customers. Nolan in 1970 came up with this model to explain the development of information system in the business world (IGI Global 2018, p. 61). According to Nolan, each stage in information system reflects a certain level of maturity in terms of management and use in business activities. In a real business world, some business may pass certain stages due to priorities and the cost embedded on the internet. This theory is summarized by the equation below.
Emails Website e-commerce Transformed organization
Emails are the initial stage of using the Internet. It enhances communication between the customers, suppliers and the staff. The next stage is that the business design a website that it can use to inform people about their products-commerce is the third stage where the business can transact online after which the organization is fully transformed.
Empirical Evidence
According to the survey that was conducted by strategic Group on the Internet user trend in the United States, 106million are users of the internet of which 53% are adults,47% is the US households who can access the internet (IGI Global 2018, p. 32) The survey further found that the number of females using the internet had tripled over the last three years in the United Kingdom. Commercial Net wanted to know the population that could access the internet in the UK and conducted a survey. The data revealed that 12.5million adults were able to use the internet in 1990 of which 44% of these were online every day.
In the year 2000, the study of the web was carried out indicating that 450 million were using the internet and he estimated that the number will increase to one billion in 2008 (Paliwoda and Ryans 2008, p. 37).The study was based on a sample of 38700 internet users carried out in 36countries via telephone. The United Kingdom was found the leading on the number of people who were using the internet by 56%, followed by the United States52% and Canada 48%.
According to Timmers (2009, p. 33), the Internet has changed the business model in the new model has moved from the traditional mass communication through a medium such as radio to the current business model that integrates internet in its structure. New internet business model has been developed which include internet presence site, online warehouse, content site, mall and search agents. The Table 1 below shows the internet users shopping online.
Table 1. Internet users shopping online in European countries (%)
Country
1998
1999
2000
2001
2002
U.S
20.2
26.1
31.2
35.7
40.5
UK
17.2
18.5
24.1
28.6
35.9
Germany
13.1
19.5
25
31.3
38.3
Denmark
10.9
17.6
22.7
28.8
36.8
Italy
7.7
13.6
18.1
23.5
28.7
Netherland
14.0
17.5
22.0
27.5
34.5
Finland
13.2
18.4
22.7
28.7
36.8
Sweden
15.1
17.4
22.7
28.7
36.4
Norway
15.1
17.4
22.5
28.4
30.8
Spain
11.8
14.7
17.7
23.7
30.8
European Average
12.2
17.1
22.0
27.1
34.2
Source: Jupiter 2004
Assessment of the Feasibility of the Internet Users in the UK
The feasibility study is the process of examining a phenomenal to establish its sustainability and the appropriateness. Researchers were conducted on an assessment of the feasibility on the use of internet in the Unite the d Kingdom with sampled a total of 96 from a population of 400 drawn from various economic class and introduced an online health facility. The ordinary health facility as a control experiment was introduced. The outcome and feedback were recorded from customers. The result showed that 86% developed the interest of online program of which 96% met the inclusion criteria. The online acceptability was at high-level recording 92%. It was concluded that online businesses could make high turnover than ordinary as it attracts more customers.
The SMEs Performance
Small and Medium Enterprises are the backbone of many countries both from developing and developed economies.SMEs are small businesses that employ few individual either as casual or on a permanent basis. Dane (2005, p. 111) found that in Sri Lanka, SMEs are defined as the organizations that deal with a particular segment of the market. The SMEs are also identified in terms of their scale of operation and the amount of capital invested in the business. According to European Commission, SMEs propel the economy of many countries through innovation and competition. The white paper on Sri Lanka indicates that about 96% of an industrial unit in Sri Lanka is made up of SMEs (Gorvine et al. 2018, p. 33).It is, therefore, true that technology for example Internet, is effectively aligned with the SMEs can yield a competitive advantage among the SMEs.
The benefit of the Internet
Granell (2015, p. 17) argues that SMEs can benefit tremendously with the adoption of the internet in their operations. He observed that internet can create e-commerce that can result in a strategic advantage among SMEs in the United Kingdom (McKnight and Bailey 2005, p. 31). Many researchers agree that investment in technology enhance labor productivity and reduces costs by a large margin (Coulter 2011, p. 122; Hardy et al. 2003, p. 1830). With Internet, the SMEs are able to find new ways of attracting and retaining their customers, design new production methods and compete effectively in the dynamic business environment (American Academy of Pediatrics 2016, p. 71) .the cost of internet in the United Kingdom is low explaining why many SMEs can assess the internet and use them in business activities. The United Kingdom remains the country with many SMEs around the globe.
The financial opportunities for using the internet among SMEs
The government of United Kingdom acknowledged the role played by of SMEs in creating jobs and contributing the economy of UK (Jolly, 2013 p. 213 ).The government entered into a deal with the various bank to extend millions of pound to SMEs as a way of expanding the export volume following the Britain Exit from the European Union. According to the Department of Finance, Mr. Fox admits that the use of internet on SMEs has not only boosted the production volume of the British products but has also increased the demand for the products globally. Other sources of funds available for SMEs are the child care Business Grand Scheme, Seed Enterprise Investment Scheme, rewards and equity crowdfunding, peer-to-peer lenders and challengers banks.
Cost of using the internet among SMEs
The cost of using the internet in the European countries has significantly reduced from the 1990s.The previous research shows that in the US, by 2016, almost 88% of the SMEs were connected to the internet. In the United Kingdom, the government subsidized the cost of internet and almost 90% is connected to the internet.
Overview of the Literature Review
The previous researchers have done several surveys and experiment to establish the importance of the internet on SMEs in various countries across the world (Cleese 2016). However, none of the studies has been tailed towards the impact of SMEs in the United Kingdom. This research study, therefore, deviates from the previous researchers to assess the impact of the internet on SMEs in the United Kingdom. In addition, the study also assesses the financial opportunities available for SMEs and the possible changes that they face.
Chapter Three
Research Methodology
Introduction
In order to achieve the objective of the research study, this chapter introduces the research design, data collection method, the model specification instruments for data collection, data analysis method and the ethical considerations.
The research design was chosen for the study
The research design is the process of integrating the component of the study incoherent and logical way to achieve the objective of the study (Baker 2006, p. 77). There are two main approaches to research design such as the qualitative and the quantitative approaches. The qualitative approach describes a phenomenon such as human behavior and beliefs. The quantitative approach is where data are used to establish the relationship between the variable and explain these relationships in a statistical manner. This research study takes the form of descriptive and explanatory research, focusing on the impact of the internet on SMEs.A thorough examination was done to establish on various research design and their purpose, strength, weaknesses and the ability to meet the objective of this study. The research questions were pursued in the context of mixed approaches that use the questionnaire and secondary data. A mixed methodology approach was chosen because was able to capture in detail in a holistic manner the contextual portrayal of the phenomenal under study
Data Collection Method
The study used the structured questionnaire in describing the impact of the Internet on SMEs as observation could not give a detailed insight of the problem. The questionnaire was distributed among the SMEs in London and other towns in the United Kingdom (McBurney and White 2013, p. 28). To understand the relationship between the demand of the Internet among the SMEs and the costs and accessibility the secondary data was used.
Types of Sampling Method
Sampling refers to a representation of a subset of a population having the same characteristic as the population to be chosen for the study (Heritage Center for Data Analysis 2008, p. 28). This study chose the random sampling method. The sample was tested through a pilot study and was found sufficient in determining the impact of the internet on SMEs in the UK.
Table 2 below shows the sample size.
Table 2. Sample size.
Number of employees
1-9
10-99
100-250
Over250
Total
SMEs in the UK
8
5
4
3
20
Model Specification for the Study
A model is a mathematical representation that tries to explain the relationship between the independent variables and dependent variables. For example in this study, the dependent variable was the impact of the internet on SMEs in the United Kingdom. The independent variables were the number of customers that organizations had the annual turnover, the number of subsidiaries and the assets (Donley 2012, p. 55). The impact of the internet on SMEs were denoted as Y, E vector of the internet, C was a vector of customers that a customer had, T vector of annual turnover of the organizations, S vector for the number of subsidiaries of the organization and A was a vector for asset level of the organization. The model for the study is represented below
Y=E(C, T, S, A, W)…………………………………………………………………..i
The equation one shows that the Internet is a function of customer level(C), the annual turnover of the organization (T), the number of subsidiaries(S) and the assets level of the organization (A) and W is the vector for internet installation and maintenance cost.
Justification of the independent variables
Annual turnover; the researcher has chosen this variable because it includes the amount of money including expenses of the organization. It was selected with the assumption that SMEs derive benefit in terms of increase in sales which result from more net income.
Total asset measured in thousands of pound represent the resource with economic value that an organization control and possess. The assumption is that when the asset of SMEs increases the size also increases. The size of SMEs determines the feasibility and the opportunities in the market in terms competition and resources mobilization.
The number of subsidiaries; a subsidiary is partly or completely owned by another company that holds control interest. The researcher has chosen this variable with the assumption that with an increase of SMEs branches is a measure of growth rate.
Cost of installation; the researcher assumed that internet services attracted cost on the organization and SMEs faces a cost constraint due to their small sizes (Nation 2007). This variable would measure the internet available for the SMEs.
Data Analysis Method
Data analysis refers to the process of cleansing, inspecting, transforming and modeling the research data with the aim of extracting useful information and deriving conclusion and suggesting decision-making process (Cohen, Manion and Morrison 2018, p. 43). The analysis started with the questionnaire response rate, descriptive statistics where mean and mode were discussed and finally the inferential statistics which measured the relationship between the exogenous variables and the independent variables.
Ethical Consideration
The researcher took into account the ethical consideration such as ensuring that the study is original in content and design. Other scholars’ work and data were credited with care to avoid plagiarism. The permission to obtain data from various SMEs was obtained from the relevant authorities. The formal consent to carry out a research study on the impact of the internet on SMEs in the UK was obtained from the department of trade in the United Kingdom (Piersol and Bendat 2013; Pope 2002, p. 8). In the data collection process, the respondents were guided with aim of seeking their volunteer acceptance to participate in the study. The research instruments did not require the name of respondents and confidentiality was emphasized.
Chapter Four
Research Findings
Introduction
The research study objective was to assess the genuine and feasible opportunities for the use of internet among SMEs in the United Kingdom (Zhu 2011, p. 23). To establish the issues and challenges affecting SMEs in the UK. The study has found that there are feasible opportunities for use of internet among SMEs in the United Kingdom. The issues and challenges affecting SMEs for using the Internet (Hurley and Keller 2006. p. 31).The findings are discussed below.
The study found that the use of internet among the SMEs in the United Kingdom had the opportunities. For example, there was cheaper internet installation; more than 78% were connected to the internet. However, 20% of the SMEs were not connected to the internet due to internal resistance, lack of enough capital to build a website. The study found that the challenges that affected the use of internet were lack of security among SMEs as their information were on the public domain, there was lack of standard in which the internet was serving the customers. In addition, the use of internet exposed the SMEs to risk of cybercrime activities as there is no privacy of the business information and activities.
The use of internet had several benefits such as access to new and many customers, learning new techniques in the production of goods and services. The businesses were able to communicate faster hence encourages collaboration in supply chain management. The businesses improved their turnover as many customers could be reached. The cost of doing the business also reduced significantly. The government subsidized the cost of internet and it’s affordable to most of SMEs in the United Kingdom.
Chapter five
Research analysis
In this chapter, the research finding is presented in parts. The first parts present the questionnaire return rate, the second parts present the background information of the respondents and the last part discusses the finding. In the discussion of findings, each objective is discussed in relation to the finding (Films Media Group 2017, p .16). The finding involved a logical descriptive analysis of the views and opinion obtained from the questionnaire filled by the respondents of the selected SMEs in the United Kingdom (Block 2005, p.14). The analysis helps in answering the research questions explaining the meaning of the finding and provides a link between this section and other sections of the report.
In this chapter, the research finding is presented in three parts. The first parts present the questionnaire return rate, the second parts present the background information of the respondents and the last part discusses the finding. In the discussion of finding, each objective is examined and discussed in relation to the finding.
Questionnaire return rate
The researcher used a total of 40 questionnaires targeting 40 respondents from finance and marketing department of the selecting SMEs firm in the United Kingdom. The research study has a sample of 8 firms with staff between 1 and 9 category A. These firms were divided into categories (A) B, C and D respectively.5 firms with the staff of between 10 and 99 (B),4 firms with the staff of between 100 and 250 (C )and 3 firms with more than 250 staff (D). The questionnaire returned rate revealed that out of 16 respondents Of category A 11(70%) returned their questionnaire, out of 10 respondents of B,8(80%) returned their questionnaire, out of 8 respondents from firms category C 7(88%) returned their questionnaire and from firm category D, out of 6 respondents 5(83%) returned their questionnaire. The result shows that 35% of the respondents did not return their questionnaires (Rouanet 2013, p.144). The possible reason for the unreturned questionnaire is may be due to many customers that these firms were serving given that the survey was conducted during weekdays when business experience high turnover.
. The result shows that 35% of the respondents did not return their questionnaires (Rouanet 2013). The possible reason for the unreturned questionnaire is may be due to many customers that these firms were serving given that the survey was conducted during weekdays when business experience high turnover.
The analysis involved a systematic descriptive analysis of the opinion and views obtained from the questionnaire filled by the respondents of the selected SMEs in the United Kingdom (Block 2005). The analysis helps in answering the research questions explaining the meaning of the finding of this report.
To what extent is genuine and feasible are the opportunities available for the use of internet among SMEs
Under this theme, the study purposed to examine the opportunities available for use of internet among the SMEs in the United Kingdom. The table below shows the age distribution of the respondents in %
Table 3.1: Age distribution of Respondents in %
Category of firm
25-40 years
Over 40 years
A
70
30
B
45
55
C
26
74
D
25
75
From the table above, the majority of staff who are in the management position of SMEs with 1-9 staffs is young with their ages ranging from 25 to 40 years. However, as firm increases in size, older people take a managerial position (Wong 2005, p. 17). The possible reason is that with the increase in age, the experience in management also increases. In terms of gender, the table below shows the gender distribution of the responded.
Table 3.2: Respondent Sex distribution
Age
Male
Female
Total
%
A
7
4
11
35
B
5
3
8
25
C
5
2
7
23
D
2
3
5
17
Total
19
12
31
100
Out of 31 respondents who returned their questionnaire, 19 were male and 12 were female.35% were from firms of category A,25%were from firm category B,23% from C and 17% from D as shown in table 3.2 above.
When asked whether the opportunities were available for the use of internet among SMEs, the table below summarizes the findings.
Table 3.3: Opportunities for SMEs
Respondents
Opportunity available(%
The opportunity not available (%)
A
60
40
B
75
25
C
88
12
D
96
4
In table 3.3 it can be revealed that opportunities to use the internet increases as the firm increases in size. A firm with staff between 1 and 9, still found it difficult to get the opportunities with only 60% are able to access the opportunity for using the internet. This is so because small businesses lack enough capital to install social network platform or to put up a website for the businesses (McNeill and Chapman 2009). However, as the business increases in size, it is able to get enough capital and access the internet opportunities as seen in firms in category D where 96% confirm that opportunities are available only 4% could not see the opportunities. The study also sought to know factors motivating SMEs to use the internet in their business (Sarantakos 2007, p. 19). The table below summarizes the findings.
Table 3.4: Need for the Internet for SMEs
Opportunities for using the internet
Respondent rate %
Research for goods and services
68
Receiving and sending business emails
72
Sending and receiving personal emails
26
Conducting research on the new products techniques
82
Purchasing goods and services online
49
The data in Table 3.4 reveals that 68% of the SMEs in the United Kingdom use internet for researching goods and services from suppliers.72% of the SMEs use internet for sending and receiving business-related emails.82% use the business for conducting research on new products and business opportunities. The study al
