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Information technology in recent years benefited organizations and management with better decision making from better quality of information in the form of Internet.
This research is aimed to explore and to understand in more depth the effects of Internet and e-commerce on small and medium enterprises in UK with a focus on hotel industry. Internet in the form of e-commerce allowed organizations to conduct their business in a completely different way by offering online services and electronic transactions.
This research look deep into the small hotel industry to find out the extent of the use of Internet and e-commerce in their business, its benefits and drawbacks as well as to develop an understanding on how it helped these small organizations with limited resources to survive and grow in this current competitive environment. With the advent of new information and communication, small and medium-sized enterprises, are presented with a window of opportunity to optimise the use of their resources, via the Internet. The use of the Internet by Small and Medium Enterprises (SME's) could provide an opportunity for faster growth and advancement with limited resources. Advancement may be measured in terms of increasing growth rates and market share, as well as reducing costs. In order to make use of the possibilities behind the introduction of innovative technologies, SMEs are expected to reassess conventional ways of doing business in order to benefit from the new technology Internet has provided an access to users from all over the world to do business online providing an excellent opportunity and medium to interact with more customers. Internet usage is growing rapidly and e-commerce is becoming more and more popular with time and many companies have moved from traditional way of doing business to the new online businesses.
The tourism industry is one of the main industries that had been drastically affected by Internet technologies. Today, at the click of a button, tourists can search thousands of potential destinations and price packages from the comfort of their own home or work place. In 1999, 52.2 million vacationers used the Internet to plan their travel and 27 million customers actually purchased a travel product online (World Tourism Organization, no date). Electronic commerce revenues in the tourism industry amounted to 7 billion US dollars in 1999 and reached an estimated 30 billion US dollars in 2003, According to the June edition of theUNWTO World Tourism Barometerinternational tourism Destinations worldwide recorded a total of 247 million international tourist arrivals in the first four months of 2009, and all these figures improved with time and today it is only second to software, hardware, books and music when it comes to frequency of products purchased online. This implies that as the net spending of consumers grows, so will online sales of tourism products. The SME sector in UK is contributing a large amount to the country economy there are more than 12000 SMEs registered in UK using electronic data interface in their business but there are problems associated with the use of technology in terms of knowledge experience skills resources etc and all these problems should be addressed to survive in this competitive environment.
E-commerce brings a lot of advantages and disadvantages to small businesses and this research is an attempt to understand and learn in more depth about the effects of e-commerce on small and medium sized hotels in UK.the researcher will be looking at how small and medium sized hotels are dealing to incorporate ecommerce in their business and how is this improving the customer experience.
In this research participant observation is done by the researcher at Hylands hotel Coventry (www.Hylandshotel.com) and Charde Guest House Birmingham (www.chardebnb.com) to observe and to analyse the environment to find the answers for the research, detailed interviews with the staff and management were carried out along with the questionnaires for the collection of primary data guests were also interviewed and a questionnaire was distributed among some of them, this provided an excellent opportunity to the researcher in getting more relevant and indepth information.
Following is the organizational background where the researcher performed ethnography for the collection of primary data and to find answers to the research questions
1.2 Organizational Background
The Hylands hotel in Coventry is a listed building which was built in late 1800's as a house by Sir Wills famed for cigarette maker Wills International , the building was acquired as a hotel in the late 1950's and was named Hyland's hotel run by Securico hotels famous security transit company. the hotel was renovated and a huge expansion plan was implemented in 1982 and two new floors were made and the total number of rooms became 70,Hylands hotel is a popular hotel in Coventry and it offers a range of services to its customers such as restaurant, bar, wireless WIFI, pool table and provides banquet services to companies for their seminars and conferences. It has three halls for this purpose beside these the hotel also provides services for private parties wedding or other such type of activities.The cost at Hylands hotel is comparatively low with good quality standards safety and hygiene. It is given a three star status.
The hotel was taken over by Euphoria hotels in June 2007, at the time of acquisition the overall performance of the hotel was bad and it was hardly surviving, the new management after 2007 made a lot of changes and developed new strategies many managerial changes were made cost cut downs were done by reducing the number of employees and hiring of part time employees.
A huge amount is spent on renovation of rooms and hotel interior. Technology advancement also made a great impact and development of the hotels website and online bookings made a good impact on the number of guests in the hotel.
The new General Manager worked really hard and is successful in his efforts as the hotel's profit is growing with the annual turnover of 700k a year and it is again gaining popularity among its competitors.
The hotel currently has 60 bedrooms and 3 conference suites, indoor sports and recreational area, 4 main bars and the main Restaurant. All modern day amenities that you would expect from an AA 3 star rated hotel are present including but not limited to wifi and broadband, business copy centre and free off street car parking.
The Hylands Hotel is located within a 3 minute walk from the Main Line Coventry Train Station, served by the M42, M6 and M1 all within a 20 minute drive. Its proximity to the motorway connections, coupled with its geographical location being Warwickshire, in the heart of the Midlands, puts it in an ideal logistic position. The Hotel is served by 2 airports both within a 20 minute drive, Coventry Airport and Birmingham international.
The Hylands has also been part of the Best Western Chain of Hotels (www.bestwestern.co.UK ). It is an American outfit which has now expanded on a truly international scale and is currently the World's biggest chain of independent Hotels. The hotel currently employees 25 staff, all local, some who have been with the hotel for over 20 years. The Hylands is a name well received and known by Coventry Local's as a pioneer and trend setter of fashionable Victorian dinning in Coventry.
The hotel mainly serves the business class, many of which are SME owner operators, Sales and support staff. International visitors are seasonal who are visiting and exhibiting at the NEC and NIA national auditoriums. Coventry Cathedral is also a main Tourist attraction along with Kenilworth and Warwick Castles and Royal Leamington Spa.
1.3 Charde Guest House
Charde guest house is a small family owned business located near national exhibition centre Birmingham. The guest house offer bed and breakfast and has 12 rooms with three employees, the business recently made their website http://chardebnb.com/ in July 2009.
1.4 Aims and Objectives
The aim of this research is to explore the importance and influence of e-commerce on growth and profitability of small and medium enterprises specifically the small hotel industry.
The current age is the age of information and technology and Internet has become a vital part of our everyday life it has influenced our way of life and it also changed the traditional approaches of conducting business and almost everyone uses Internet for to get different services such as selling buying and other online transactions and the researcher aim is to study all these factors to evaluate the effects Internet has on SME.
This research will investigate to which extent the small and medium sized hotels in UK are using ecommerce in their business and to identify the barriers to the adoption of ecommerce along with the identification of advantages and disadvantages of e-commerce to their business.
The objectives of the research are as following:
1. To critically evaluate the relevant literature on small firms and the importance and the usage of Internet.
2. To understand the problems faced by small hotels and the barriers to the use of Internet and ecommerce in their business through articles, newspapers interviews surveys and through participant observation.
3. To gain specific knowledge of Internet usage for small hotels in business through participant observation interviews publications and company information.
4. To provide recommendations for improvement the usage of Internet as a competitive tool.
5. To identify, advantages and disadvantages of e-commerce to SME hotels in the UK.
2 Literature Review
E-commerce is the buying and selling of goods and services on the Internet, especially the World Wide Web. In practice, this term and a newer term, e-business, are often used interchangeably.
The current age is the age of science, technology and the Internet, electronic commerce have made the world market a smaller place to trade in it has created a universal platform for buying and selling which has resulted in reduced transaction cost and faster transaction time the Internet has opened many possibilities of organizing and running online businesses e-commerce has its benefits and short comings according Fuatai and Janet (2004) “despite all the hype surrounding the electronic commerce and recent failure of many dot com companies it does present real opportunities to small interprenures in small countries”.
2.2 Classification of e-commerce
Ecommerce can be classified in the following categories:
2.2.1 Electronic market:
It refers to buying and selling goods and services where the business center is not a physical building but rather a network based location at an electronic market base. All the transactions such as information request transfer of money between banks, payment acknowledgement, service delivery, purchase delivery, purchase acknowledgement etc.
2.2.2 Inter organizational systems
The objective of inter organizational system is efficient information and transaction processes a typical IOS includes a company and its suppliers or customers, buyer and sellers exchange information and business transaction over communication network such as EDI, extranet, electronic form, channel databases and electronic funds transfer.
2.2.3 Customer services
E-commerce plays a dual role in customer service it provide customer services to processes that are done off line as well as it provide help to on line transactions. It is a series of activities to help customers to resolve problems encountered at any stage of purchasing process and also to enhance the level of customer satisfaction the customer service include the following
* To provide technical information to customer
* To provide search and comparison capabilities
* To answer customer enquiries
* To allow customer to track order status
* To allow customer to place an online order
2.3 E-Commerce Applications
2.3.1 Inter organizational e-commerce
E-commerce can be applied in the following INTER organizational business
220.127.116.11 Supplier management:
Electronic applications can help the companies by facilitating business partnership by reducing purchase orders, processing cost and cycle times it also reduces the number of suppliers by increasing the number of purchase orders handled with fewer people.
18.104.22.168 Inventory management
Through electronic applications business can improve auditing capabilities and also helps in reduction of inventory levels improved inventory and elimination of out of stock occurrences businesses can also track their documents and information transmitted electronically, can make sure that they are received.
22.214.171.124 Distribution management:
Electronic applications can enable better resource management by ensuring the accuracy of data it facilitates the transmission of documents such as purchase orders shipping documents, bills, claims, etc
126.96.36.199 Channel management:
By linking of production related information electronically with reseller networks and distributors around the world can save hundreds of labor hour and can ensure accurate information sharing.
188.8.131.52 Payment management:
Electronic payments reduces errors and increases the speed of transaction and lowers transaction fees and cost by linking companies with suppliers and distributors electronically enables payments to be sent and received electronically.
2.3.2 Intra organizational commerce
It helps the company to maintain critical relationships to delivering customer value it can be applied as followings
184.108.40.206 Work group communication:
It helps the manager to communicate with the employees more efficiently and effectively through emails video conferencing resulting in well informed work environment.
220.127.116.11 Electronic publishing:
It is used by the companies to publish and organize their information regarding product specification, meeting minutes, office memos etc it helps the company by faster delivery of information and elimination of printing cost and other overheads.
18.104.22.168 TYPES OF TRANSACTION:
· Business to business
· Business to customer
· Customer to customer
· Customer to business
2.4 CHALLENGES TO E COMERCE:
The growth of Internet and its users offer great deal of advantages to ecommerce and businesses but there are some challenges which are discussed below
2.4.1 Security and privacy:
The most important issue with online businesses is security and privacy of data. Important information such as credit card details, personal information, business information, business plans can easily be accessed and tracked by hackers. This is the major threat to the growth of businesses online.
2.4.2 Legal issues:
As Internet is used by individuals from different countries and every country has its own legal system. In case of legal conflict it becomes very complicated to address the conflict legally.
2.4.3 UN successful business models:
As the innovation in technology is very rapid because of this it becomes too expensive for the companies to keep up with these rapid changes and to stay up to date.
2.4.4 Channel conflicts:
Companies most of the time use multiple channels online as well as traditional channels to sell their products and services. It becomes extremely important to maintain a balance between these different channels because imbalance between these channels can lead to very big problems.
The definition of an SME (small and medium enterprise) used by the South West Ventures Fund is a Business or company that:
Have fewer than 250 employees and has either
(a) annual turnover not exceeding €50 million (approximately £24 million)
(b) An Annual balance sheet total not exceeding €27 million (approximately £16 million); and 25% or more of the capital or the voting rights are not owned by one enterprise, or jointly by several enterprises falling outside this definition of an SME.
While most people know that SME stands for Small Medium and Enterprise, there was no clear cut definition of SME or how a company, entrepreneur or a business organization can be classified into SME category. This posed confusion especially when an entrepreneur is looking to get assistance from the SME related bodies and financial institutions.
Different agencies and bodies used various different parameters in deciding if a business entity falls under the SME group e.g. sales turnover, number of full time employees, paid up capital and so on.
That however changed in 2005, when the National SME Development Council announced the official and a standardized definition of SME. This definition is too used across various sectors, and adopted by the government ministries, agencies and financial institutions which are involved in the development program of the Small Medium and Enterprises (SMEs).
The definition of SME is based on two criteria, namely:
The number of people the business is employing, or Annual sales turnover or revenue
The European Commission (2003) defines SME's as follows: "micro enterprises are enterprises with a maximum number of 10 employees, a maximum turnover of 2 million Euros and a maximum balance sheet of a total of 2 million Euros. While small enterprises are enterprises with a maximum number of 50 employees, a maximum turnover of 10 million Euros and a maximum balance sheet of a total of 10 million Euro.
2.6 SME AND ECOMERCE:
The growth of Internet users have made the Internet a potential market for businesses Internet has become an effective medium for marketing and business it is the most effective media all over the world which makes it a compulsory channel to use for new market entrants.
According to website(http://www.ecommercejournal.com/tags/SME) A survey conducted among Net registry domain name customers and non-Net registry SMEs shows that online business will be experiencing a substantial growth throughout 2009. They already are more confident about their business prospects (46% versus 13%), are more likely to be planning expansion (57% versus 39%), are more likely to export (28% versus 15%), and are more likely to be earning more profit in 2009.
The major problem for small firms is to prove their identity in the market in competition with strong companies and existing small firms, Internet is an efficient way to do this and to let customers know that they are in the market the cost which comes with e-commerce is very reasonable for the market entry as small firms try to cut their cost and increase the investment in their businesses and that's what the e-commerce (Internet) does for them by providing great opportunities to small firms for their activities in the market no matter how big the market is e-commerce is the most efficient way to success for small firms in existing highly competitive market. Detailed benefits of e-commerce to SME's are summarized as follows:
* Innovative products, better services and exploring new market opportunities;
* Shift in value added and content components of what is made and sold;
* Changes to economies of scale and the traditional barriers and advantages of large enterprises;
* Untying work functions from specific locations and time constraints;
* Flattening and disaggregating of organizational structures;
* Scope for customization at low cost;
* Commercialization of in-house content and know-how.
2.7 SME's IN UK
From the above literature it could be rightly said that E-Commerce adoption is an essential business strategy for SME's to obtain competitive advantage.
New figures published today by the DTI's Small Business Service (SBS), show there was a net increase of around 200,000 firms operating in the UK in 2007 compared to the previous year - equivalent to over 500 new businesses starting up every day.
The figures are the highest year on year increase in business numbers since the statistics were first collected in 1995.
The proportion of national turnover and employment generated by SMEs also increased from last year to its highest level in five years. They now account for 99.8 per cent of the business population, with an annual turnover of £2.2 billion, and employ over 12.6 million people.
The overwhelming majority of SMEs are businesses with up to 49 employees, accounting for 99.2 per cent of last year's total. Some 26,000 medium-size companies - up to 249 employees - represented 0.6 per cent of the population and 6,000 enterprises with more than 250 workers made up the balance.
The smallest firms provided work for 46 per cent of the 21.7m-strong labour force and represented 52 per cent of the £2,200 billion turnover generated by the 4m businesses.
Almost 3 million businesses were effectively one man bands, highlighting the growing trend towards self employment for everyone from IT professionals to plumbers as well as the increasing ease of working from home. But these ‘micro businesses' still contributed £178 billion to the UK economy.
"There are major opportunities for new entrepreneurs and small- to medium-sized businesses to flourish in the maturing of e-commerce" (Drew, 2003). The use of e-commerce has provided a variety of benefits for SME's as well as a number of potential opportunities. “The Internet is usually presented as an opportunity for smaller firms because it helps reduce transaction costs and level the playing field" (Evans and Wurster, 1997). The opportunities for SME's include expanding scope of marketing, wider and richer communication, reaching new market and reducing cost of operations and partnering with suppliers (Drew, 2003). According to a report conducted by Prerost (1998), there are variety of opportunities added to SME's, including efficiency and productivity for business process, the development of new market opportunity (B2C and B2B) as well s access to global market. Also, the e-commerce give SME's opportunity to exploit competitive and know how benefits as suggested by Tagliavini et al. (2001). Nevertheless, how to use e-commerce as an opportunity to SME's will depend on the industry and firm factor implied by Drew (2003). These influenced factors include: The smaller firm's technical and Internet knowledge; The rate at which the market is growing; The pace of innovation and change in the industry; The technical and Internet strengths of the larger competitors; The sources of competitive advantage for the smaller business; The strategic intent of the larger competitors; and The structure of the industry in which the firm competes.
Generally, the market, industry structure, and macro-environment will be the major influenced factors that decide e-commerce as an opportunity or threat for SME's. Therefore, although it is not doubt that e-commerce has provided a huge opportunity for SME's in the range of business activities, the external and internal factors must be considered strategically while adopting e-commerce. However, Tagliavini et al (2001) argued, "the real opportunity of E-Commerce adoption for SME's is still unclear"(p.211). The significant opportunity for SME's is to extend existing market to international market addressed by a number of authors (OECD, 1998; Webb and Sayer, 1998; Walczuch et al., 2000 and Tiessen et al., 2001). Tiessen (2001) remarks “the twin phenomena of globalization and e-commerce pose new challenges and provide competitive opportunities for large and small firms alike”. It is an imperative opportunity for SME's to access the global market, as the one of the important feature of e-commerce is global reach as stated by Laudon (2001). Therefore, SME's are expecting the opportunity to extend existing market into globalization by using e-commerce. Undoubtedly, Internet has provided a chance for SME's to diminish the entry barrier and costs into global trading market as "electronic commerce offers companies the possibility to sell internationally, effectively removing constraints of time and location and substantially enhancing their competitiveness", and it is the most imperative opportunity for SME's to increase productivity and the capability to entry markets and discover business partners globally (OECD, 1998). Indeed, the reach of global market is an exciting opportunity for SME's to grow in terms of the size of company and competitive advantage. However, Jutla et al. (2002) proclaims that “globalization pressures arising from e-commerce operations often mean hat SME's have to acquire international trade knowledge". Publishing company's website in the Internet is simple but trading in the global market is not so simple task for any of the SME's. As Tetteh and Burn (2001) points out that "the challenge for SME's are complicated by the general lack of clearly defined frameworks for analysis of the entire processes of strategy building, implementation and management with aspect to the emergent global information economy". However, e-commerce truly provides the great opportunity for SME's to increase competence with lager firms in variety of business opportunities as well as an opportunity to extend trading geography. The various opportunities offered by e-commerce are the significant riving factors that encourage a firm to adopt e-commerce as its business operation.
Although the use of e-commerce has provided a huge opportunity for SME's in range of business activities, e-commerce might become a threat for SME's while trying to explore a variety of opportunity by using e-commerce. As Drew (2003) indicates there are a number of threats of e-commerce for SME's. These threats include increasing competition from larger firms as "the new medium allows larger firms to mimic the traditional strengths of SME's in serving niche markets, developing customer intimacy and exploiting local knowledge", and " for a regional firm, which previously may have had little local competition, may be faced with new threats from across the country or the globe" (Drew, 2003). In fact, small firms have less competitive advantage than larger firm as Davies and Garcia-Sierra (1999) points out SME's had fewer resources compared to larger firms. Meanwhile, a survey conducted by OECD (1998) found that "it is more difficult for SME's to reach the Benefits of e-commerce than for larger firms". This could be because SME's are having less resource than larger firms. Therefore, the opportunity provided by e-commerce might present in different result between SME's and larger firms. For SME's, e-commerce might present as a threat because of a lack of resource and a lack of essential knowledge of how to do business on line. E-Commerce provides opportunities and benefits for SME's but the new threats also come from using it.
2.10 Research Methodology
A good research methodology is a general plan of how the researcher will go about answering the research questions considering the sources to collect data and the constraints that one might have (access to data, time, location and money, ethical issues etc). It should reflect the fact that the researcher has thought carefully about why a particular strategy has been employed. A collection of methodologies was used to carry out this research. Both primary and secondary research was carried out for this purpose. Primary research is research that is being carried out specifically to answer a particular research question. Primary research is carried out by the researcher himself/herself and is not based on others work. It is often termed as first hand research and observation. Few approaches to primary research are: focus groups, surveys, experiments, interviews etc. Primary research is much more expensive than secondary reseatch. Secondary research is based on information gathered from studies previously performed by other researchers or other organizations. Secondary sources may vary from libraries, Web, books, publications, magazines and newspapers. Secondary research is cheaper than primary research; it's not as accurate, or as useful, as specific as primary research.
The first stage of the research comprised of collecting secondary data from the literature review. According to Sharp and Howard (1996), two major reasons exist for reviewing the literature. First, the preliminary search helps to generate and refine the research ideas. And secondly, a critical review is a part of the research process. Like most research projects, literature review was an early activity in this research. After the initial literature search, the researcher was able to redefine the parameters more precisely and undertake further searches, keeping in mind the research objective and goal. The literature review helped in developing a good understanding and insight into the previous research done on this topic and the trends that have emerged.
The next stage of the research comprised of short listing of the Small firms where the survey had to be carried out. Companies which have an online presence as well as those which run business offline i.e. which operate on ‘bricks and mortar' model were selected. The central idea of the research was to find out the overall e-business transition process of the Small firms who have already achieved it and others who are undergoing the change. Also the barriers to the adoption of e-commerce in small firms were identified.
In this research I have collected primary data through Participant Observation, Guest & Staff Survey interviews and Hotel Industry Publications.(According to Saunders) “Participant observation is where the researcher attempts to participate fully in the lives and activities of subjects and thus become a member of the group, organisation or community. This enables the researcher to share their experience by not merely observing what is happening but also feeling it (gill and Johnson, 1977:113)”
During the course of my observational research, I spent 3 nights at the Hylands Hotel as a guest, thereby experiencing every aspect of a customer's experience, Value for Money. At the same time I also spent my time attached with the Key Management figures, specially the General Manager and the Front House manager to evaluate and assess their dealings with the day to day issues that arise in this fast moving Industry.
a survey was carried out and a set of questionnaire was also prepared to collect primary data. Bell (1993) says that surveys can provide answers to questions like What, Where, When, And How. It tries to elaborate the problems of ‘representativeness' from other approaches like case studies or most of the qualitative approaches. This approach can be termed as fact finding mission and may contribute little towards the development of a hypotheses or shaping theory. The results from the survey can definitely be used to test a hypotheses or theory. The data here is primarily quantitative but may also be qualitative in nature as it represents peoples view about an issue. Questionnaires are generally used for the purpose of data collection. The different distribution techniques as described by Hussey and Hussey (1997) were followed. The questionnaires were circulated to the employees and consumers through Post, Telephone, face-to-face, Group distribution, email distribution and individual distribution. Hussey and Hussey (1997) identify some important factors to be considered while using questionnaire.
The Questionnaires (see appendix) filled out by staff members and some very loyal and honest customers have been a key insight into how the hotel, its operations and management are portrayed to the other side. Some key comments are now being used as the inspiration and initiative required improving or introducing new procedures and services as a result.
The next stage of data collection will consist of in-depth interviews with the representatives as well as employees and customers they will be Structured interviews structured interviews can be used for a wide range of purposes, depending on the questions used and the manner in which participants are selected. They can provide valuable insight into students' understanding (or misunderstanding) of the course content, document students' course-related knowledge and skills either at specific points in time (e.g., before and after instruction) or longitudinally, or provide information on students' perceptions of the pedagogical or technological methods used. (http://www.sociology.org.UK/methfi.pdf)
Semi structured interviews this technique is used to collect qualitative data by setting up a situation (the interview) that allows a Respondent the time and scope to talk about their opinions on a particular subject. The focus of the interview is decided by the researcher and there may be areas the researcher is interested in exploring. (http://www.sociology.org.UK/methfi.pdf)
Unstructured interviews Interview without any set format but in which the interviewer may have some key questions formulated in advance. Unstructured interviews allow questions based on the interviewee's responses and proceeds like a friendly, non-threatening conversation. However, because each interviewee is asked a different series of questions, this style lack the reliability and precision of a structured interview. Also called non-directive interview (http://www.sociology.org.UK/methfi.pdf).