LITERATURE REVIEW

CHAPTER TWO

LITERATURE REVIEW

2.1 INTRODUCTION
This chapter will be used to review all the necessary related literature for this research. The meanings and definitions of some of the key terms in this study will be discussed too.
The researcher will discuss some of the terms of E-Business as it relates to this work before embarking on the research.
The researcher will start by looking at what other researchers suggested that might prevent SMEs from adopting effective Internet marketing, discuss and analyze some of the winning Internet marketing strategies and methods that were recommended to be adopted by any E-businesses.
The summary of the chapter will be made at the end of this chapter.

2.2 Small Businesses
The terms “SME” and “small business” are often used interchangeably. The definition of a small business as outlined by the Small Businesses Act 1953 is “one which is independently owned and operated and not dominant in its field of operation.” Hodgetts (2001)
Another definition of small businesses which used by European Commission is that they are privet companies with fewer than 250 employees and their annual turnover does not exceed 50 million EUR, and/or their annual balance sheet total does not exceed 43 million EUR. (European Commission 2003)

According to European Commission (2003) the SME sector is made up of 3 components:

1. Micro-enterprises: those with between 1 and 9 employees, their turnover is equal or more than 50 million EUR or their balance sheet total is equal or more than 43 million EUR.
2. Small enterprises: those with 10 to 50 employees, their turnover is equal or more than 10 million EUR or their balance sheet total is equal or more than 10 million EUR.
3. Medium enterprises: those with 50-250 employees, their turnover is equal or more than 2 million EUR or their balance sheet total is equal or more than 2 million EUR. (European Commission 2003)

For the purpose of this study, the definition provided by Small Businesses Act (1953) will be used when referring to small businesses and the term SME will remain as defined by the European Commission. (2003)

This sector was chosen because according to European Commission Small and Medium-sized Enterprise (SMEs) are the main drivers of the economy and represent 99 % of all the enterprises in the EU and also provide for almost 65 million jobs; furthermore SMEs contribute hugely to the economy, entrepreneurship and innovation . (European Commission 2006)

SMEs in UK according to Yeo (2002) employing fifty seven per cent of the workforce, moreover and according to Small Business Service (2006) in 2005 there were approximately 4.3 million businesses in the UK. 99.3 percent of them are small (0 to 49 employees). 27,000 (0.6 per cent) are medium-sized (50 to 249 employees) and 6,000 (0.1 per cent) are large (250 or more employees).

Effective use of Internet marketing can provide SMEs with a low cost gateway to wider markets and offers them huge opportunities. Also good planned strategic approach if adopted by SMEs can help to overcome many of the barriers and obstacles that they might face.

E-marketing strategies, tools and techniques for SMEs

Employing effective and economical E-marketing strategies, tools and techniques for SMEs

Small businesses that are the main drivers of the economy and represent 99 % of all the enterprises in the EU and also provide for almost 65 million jobs are facing huge competition online.

Effective use of Internet marketing can provide SMEs with a low cost gateway to wider markets and offers them huge opportunities. Also good planned strategic approach if adopted by SMEs can help to overcome many of the barriers and obstacles that they might face.


1.1 Introduction:
Businesses and consumers nowadays increasingly rely on the Internet as both a primary revenue generator and information provider. It also has become a key element of the global economy and a major driver of new businesses. (UNCTAD 2006) The Internet also offers opportunities for companies to market their products and services around the world without physically making contact with customers or forced to advertise in other parts of the world.

The growth of E-Business attracted big companies to invest heavily on online advertising to attract more consumers to their business and furthermore start building reputation, which include the reputation of the firm itself, the brand name, and the product or consumer experience. (IAB 2006)

Online advertising with growth of 40.3% in year 2006 (IAB 2006) remains to be the fastest growing advertising medium in the advertising market; it has become a popular advertising channel attracting much media attention, and raises fresh opportunities and challenges.
The latest report by (IAB 2006) showed a record spending of online advertising during the first half of 2006, reaching £917.2m, (£1,653.2m in 2005), which increases the online advertising market share to 10.5%, up from 7.3% for the first half of 2005.

1.2 The Main Drivers for Online Advertising
The increase of the online population and the e-commerce boom are fuelling this growth, and also:

1. The dramatic increase of broadband users , (IAB 2006)
2. The increase number of online shoppers . (Lombardi 2006)
3. The increase of the money online shoppers spends . (IAB 2006)
4. The increase of the average time shoppers spends online.
5. Cheaper and faster Internet access.
6. Cheaper and more reliable computer hardware and software.

And further to the above, the cost effective and highly targeted nature of E-Marketing, together with the ability to monitor the results quickly and precisely, which meant that any E-marketing campaigns can be improved in real time to produce the best possible results and return on investment.( Rafi Mohammed et al. 2003)
Though it is widely accepted that the Internet offers companies a wide range of opportunities, there is still a lack of adoption of effective Internet marketing among SMEs to be able to exploit the Internet.

1.3 Research Context
This study is to examine the Internet marketing strategies and techniques which currently adopted by SMEs in all sectors in the UK, and furthermore investigate and analyse the existing issues that prevent these SMEs form identifying and employing effective and economical Internet marketing.

1.4 Research Problem
SMEs with small business budget and limited knowledge and expertise can not identify and use effective Internet marketing strategies and techniques to be able to compete online with larger businesses and to enable them to strengthen their online presence.

1.5 Research Questions

1. Why do SMEs fail to identify and employ effective and economical Internet marketing?
2. How SMEs with small business budget and limited resources and expertise identify and use E-Marketing strategies and techniques to compete online with large businesses?

1.6 Research Aim
Identify effective and economical e-marketing strategies, tools and techniques for SMEs to improve their competitiveness and to enable them to strengthen their online presence.

1.7 Research Objectives

1. Investigate and analyse the existing issues that prevent SMEs form identifying and employing effective e-marketing framework.
2. Identify and analyse online advertising strategies and techniques of small businesses.
3. Suggest an effective and economical E-marketing strategies and techniques for SMEs to follow.

1.8 Research Value (what does it contribute to IT research/practice)
The outcome of this research will help system analyst and web site designers to plan, design and implement E-commerce site that optimized for search engines.
Furthermore by highlighting the importance of Internet marketing, system analyst will be encouraged to design inexpensive and easy to use systems for small businesses.

1.9 Research Rationale
This research will help small businesses understand the impertinence of Internet marketing to their business and use it to gain competitive advantage, reaching new customers and expending their market share and also permit SMEs to sell globally.
Furthermore the researcher thinks that the field of Internet marketing is not investigated properly in the past because it is new emerging technology.

The study also helped the researcher himself understand Internet marketing’s strategies and methods, and also understand the problems that prevent small businesses from using it to compete successfully online either locally or globally.

1.10 Research Strategy & Methodology Overview
The multiple explanatory case study methodology will be used for this study, concerning competitive disadvantages affecting SMEs in the UK.
In order to solve the research question the case study methodology was chosen among the other theories because case study method involves using multiple sources and techniques in the data gathering process, furthermore because the researcher needs to know how and why E-marketing campaign had worked or not, according to (Yin 2003) how and why questions are more explanatory and will lead to the use of case studies as the preferred strategy.
The case study will investigate issues such as E-Marketing and advertising strategies and techniques; however before defining the research problems data gatherings will be carried out using quantitative and qualitative methods such as semi structured interviews, questionnaires, direct observation and documentations, focusing on the “what” and “how” questions (Yin 2003), moreover the researcher will state how the data was collected and analysed.
The researcher will select SMEs as the unit of analysis (Tellis 1997); focusing on their marketing strategies and techniques, and the outcome of this case study will be represented in report format.

1.11 Research Scope and Limitations
There was not enough up to date information regarding SMEs and their use of online marketing.
Furthermore the researcher thinks if more small businesses participated in the survey that could generated more data which could help the research. Also the researcher was restricted to analyse only the data which came from companies who have responded to the survey.
Moreover the time limit for organising the interview and getting appointments with the interviewee. The time limit also prevented the researcher from making further efforts in getting more studies in this field.

1.12 Thesis Layout
This dissertation will contain the following seven chapters:
A short introduction to the entire report will be in chapter one. It will provide a brief background of the study, the aims and objectives of the research, the research study methodology that will be used in this study, data gathering methods and finally the layout of the dissertation.
A review and analysis of past and present literature concerning different issues that affect and prevent small businesses from adopting effective Internet marketing will be in chapter two.
Chapter three will discuss the methodology used in this research; furthermore explain the data gathering methods and the way that data was analysed.
Chapter four will analyse the data gathered in relation to the research problem, questions and objectives.
Chapter five will evaluate and discuss the out come of the research.
The conclusion will be in chapter six, which will include the summary of the research and suggest future recommendations.
Chapter seven is the self evaluation of the research.

1.13 SUMMARY
This chapter started with short introduction to the dissertation followed by the aims and objectives of the study by discussing what the study would attempt to achieve on the long run.
A background to the proposed study was provided by drawing attention to the concept of adopting some Internet strategies that will influence SME’s and the issues predominantly raised in the said sector.

Section 1.4 stated the research questions that will guide the study, followed closely by a summary of the theoretical framework that this study will be based. Section 1.5 is the research methodology that describes the methods that would be utilised to obtain data for the study before progressing to provide an outline of the following chapters of the dissertation.
In the next chapter, a literature review will be done and the theoretical framework will be further expatiated on.