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Why Digital Technology?

With the advent of the personal computer and the Internet, small firms may be able to compete

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on a more equal footing with larger firms through their intelligent use of digital technologies. It

would be impossible to list all the types of software that can enhance small business operations,

so the focus will be on the major types of aids.

Today, even the smallest of firms can acquire a complete accounting system at a reasonable

price. These packages can be tailored for specific industries and are designed to grow with the

company. They not only generate standard accounting and financial reports but also assist with

management decision making. Information about accounting software for small businesses is

easily available on the Internet.

Small-business operations have also benefited greatly from affordable software that can handle

forecasting, inventory control and purchasing, customer relations, and shipping and receiving.

In fact, the software has advanced to the point where a small firm can cost-effectively possess its

ownenterprise resource planning (ERP) system. Only a few years ago, ERP systems were out of

reach for all but the largest firms. ERP systems integrate multiple business functions, from

purchasing to sales, billings, accounting records, and payroll (see Figure 1.2 “Broad Schematic of

an ERP System”). These advances now give small firms the capability and opportunity to

participate in global supply chains, thus broadening their customer base.



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Figure 1.2 Broad Schematic of an ERP System


Touch screen computers, smartphones, or iPads can bring a new level of sophistication to data

entry and manipulation and communications. Smartphones can boost productivity, especially

when out of the office. [9] It is predicted that the iPad will change how we build business

relationships, particularly with respect to connecting with prospects in a more meaningful

way. [10] Inventory control may soon be revolutionized by a technology known as radio-

frequency identity devices (RFIDs). These small devices enable the tracking of inventory items.

These same devices may change retailing by curtailing time at checkout and eliminating

pilferage. [11]






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Using Smartphones in Your Business

Lloyd’s Construction is a 100-person demolition and carting firm in Eagan, Minnesota. This

small, family-owned business is not your typical candidate for a firm that exploits cutting-edge

technology. At the suggestion of the president’s 17-year-old daughter, the firm switched to a

smartphone system that allows for integrated data entry and communication. This system

allowed the firm to reduce its routing and fuel costs by as much as 30 percent. The firm was also

able to further reduce accounting and dispatch costs. On an investment of $50,000, the firm

estimated that it saved $1 million in 2007. [12]


All these technologies, and others, are within the reach of the small business, but careful

analysis must determine which technologies are best suited for a company. Given the speed of

digital technology development, this analysis is something that should be conducted on a

frequent basis. It is in the best interest of every small business to introduce digital technologies

into the business as quickly as is practical and affordable. There should always be an interest in

doing things better and faster. Through technology, a small business owner will be able to do so

much more: grow the business (if desired), work smarter, attract more customers, enhance

customer service, and stay ahead of the competition. [13]

The smaller the business, the more efficient it needs to be. Digital technology can help. Digital

technologies, with their relatively low cost, ease of implementation, and power, can offer small

businesses the rare opportunity to compete with larger rivals. If smaller firms are able to fully

use the capabilities of these technologies along with exploiting their faster decision-making

cycle, they can be the ones that secure competitive advantage.

Why E-business?

E-business is a term that is often used interchangeably with e-commerce, but this is not

accurate. E-business uses the Internet and online technologies to create operational efficiencies,

thereby increasing value to the customer. [14] Its focus is internal—for example, online inventory

control systems; accounting systems; procurement processes; supplier performance evaluation

processes; tools to increase supply chain efficiency; processing requests for machine repairs;



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and the integration of planning, sourcing, and manufacturing. Critical business systems are

connected to critical constituencies—customers, vendors, and suppliers—via the Internet,

extranets, and intranets. [15] No revenue is generated, but “e-business applications turn into e-

commerce precisely when an exchange of value occurs.” [16]

E-business processes should be introduced wherever there is a process that is currently working

OK but is costing unnecessary time and money to implement via paper. This would certainly

apply to the small business that finds itself drowning in paperwork. Small businesses should

always consider that e-business processes could improve their operational and cost efficiencies

overall, so thinking about e-business implications should be part of many decisions. E-business

can work for any small business “because it involves the whole business cycle for production,

procurement, distribution, sales, payment, fulfillment, restocking and marketing. It’s about

relationships with customers, employees, suppliers and distributors. It involves support services

like banks, lawyers, accountants and government agencies.” [17] The way you do business and

your future profitability will be affected by e-business. Converting your current business into e-

business may require some redesign and reshaping, depending on the size of your company.

However, e-business integration should be seen as an essential element in the efforts of a small

business to increase its agility in responding to customer, market, and other strategic

requirements. [18]

Why E-commerce?

E-commerce, the marketing, selling, and buying of goods and services online, is a subset of e-

business. It generates revenue, whereas other areas of e-business do not. E-commerce has

experienced extraordinary and rapid growth and will continue to grab more market share. [19]

In a survey of 400 small businesses, each with fewer than 100 employees, it was reported that

the Internet had significantly improved growth and profitability while helping to reduce costs.

Some businesses even indicated that they rely on the Internet to survive. Interestingly, the

survey participants themselves took advantage of e-commerce to purchase computers and office

technology online (54 percent), capital equipment and supplies (48 percent), and office

furnishings (21 percent); one third bought inventory for online resale, and 59 percent purchased



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other business-related goods online. [20] E-commerce offers many benefits to small businesses,

including the following: [21]

• Lower business costs. It may not be necessary to maintain as much physical space and staff.

• Greater accessibility. Customers can shop when they want to.

• The ability to provide customized service. Like Amazon.com, companies can address their

customers on a personal level by recognizing and greeting repeat shoppers.

• Increased customer loyalty. Companies can give information to customers while offering something

of value (e.g., a coupon for use on the next purchase or helpful hints about using a product).

These benefits make it possible for a small business to compete with, perhaps even overtake,

larger companies that do not have the agility and innovation of a smaller company.

The realities of Internet usage make a strong case for small businesses to integrate e-commerce

into their operations, including the following:

• Seventy-four percent of American adults use the Internet.

• Eighty-one percent use the Internet for information online about a service or product they are thinking of


• Seventy-one percent buy products online. [22]

• Sixty-six percent of adults have home broadband. [23]

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