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.