INTERNET USE IN ENTERPRISES (THE CASE OF SMELINK) Kulno Türk, Maive Suuroja University of Tartu

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1 INTERNET USE IN ENTERPRISES (THE CASE OF SMELINK) Kulno Türk, Maive Suuroja University of Tartu Joining the European Union Estonia has to start competing with the enterprises of the EU. Therefore the government has to pay more attention than before to supporting of the entrepreneurship and providing it with important information to guarantee their competitiveness compared to the enterprises of the EU and all the other developed countries. Skills of using the information technology and access to information will in coming years become the main factors determining the success of organizations. Implementers of new information technology perceive the need for it and see information as a possibility to prevent problems, find new opportunities and thereby increase competitiveness and potential of the organization. Studies show that large enterprises have more possibilities to implement new technology (Premkumar et al 1999: 467, 480; Jemmeson 1997: 139). In recent years, increasingly more attention has been devoted to problems related to small and medium-sized enterprises, small entrepreneurship support policy has become an important part of European countries economic policy. A significant decrease of small entrepreneurship in the national economy would increasingly lead to monopolization of enterprises and conflicts between employers and employees, which could eventually lead to extinction of the free competition-based market economy. Therefore, the state must pay more attention than before to supporting small entrepreneurship and providing it with information in order to ensure competitiveness with large enterprises. Small enterprises need state support in order to achieve a position equivalent to large enterprises. For this reason, extensive small entrepreneurship support programs have been launched in European countries. Also, the European Union has several aid programs to support small enterprises technological development. One of the most extensive of those is Smelink.se, a training and Internet project for small and medium-sized enterprises, which was launched in 1996 in Sweden and which aims at increasing the entrepreneurs competitiveness by improving their access to strategic business information and widening new business opportunities (Johansson 2000). Based on the experiences with Smelink.se, an analogous project (Smelink.ee) and an Internet portal was created also in Estonia, in the launching of which the authors of the present article also participated in. Smelink.ee aims to provide Estonian enterprises with information in order to support their development and increase their competitiveness in Estonia and in Europe. The target group is mainly small and medium-sized enterprises. The Internet portal gathered together information needed by entrepreneurs in their business activities. In addition, entrepreneurs were offered free Internet training. 579

2 The present article deals with the current state of Internet use in Europe and in Estonia and theoretical and practical issues in the possible competitive advantage that could be acquired by it. The article examines opinions and assessments of the entrepreneurs who participated in the Smelink.ee project on the use of information technology in business activities, based on the results of a questionnaire study carried out by authors. The article also analyzes entrepreneurs evaluation of the Smelink.ee project and information technology in general. The role of the Internet in an enterprise and problems of its use On average, 28% of the population of the European Union member countries were Internet users as of fall Estonia is on the same level with Germany, its respective figure being 22%. Estonia has made significant progress in the widespread Internet use, but we cannot yet compete with the leading countries. The biggest Internet users are Finland and Sweden (both 44%) and Denmark and the Netherlands (both 43%). At the same time, Internet use in Estonia surpasses such big countries as Italy, France and Spain. (Worldwide 2001; Europe 2000) The year 1999 saw explosive growth of e-business in Europe. The most recent Eurobarometer study, which was carried out in all European Union member countries, examined as an important aspect the use of Internet in European small and mediumsized enterprises. Of about five thousand enterprises questioned, 70% had an Internet connection. 40% of the questioned enterprises had created their own web page. (Europe 2001). 26% of EU small and medium-sized enterprises sold their products or services to private customers and 27% to businesses. Leaders in e-business are currently enterprises engaged in software, media and financial services sectors. From among countries, the leading position in B2B business is held by England. The role of online marketers in business has increased sharply. Experts estimate that currently, less than one third of online marketers earn profits. Yet their development opportunities and prospects for the future are considered to be very good (Internet 2001) In recent years, the important role played by the Internet in improving an enterprise s competitiveness is increasingly being emphasized in scientific literature. At the same time, the specific role of the Internet in changing and improving business activity has still been inadequately studied. The main reason is delineation and determination of the Internet s role in increasing the enterprise s efficiency. While the Internet helps to reduce capital costs, it may increase time costs and the level of risk. Large amounts of information also require additional information processing and therefore, costs of searching for information increase. (Dutta et al 1998: 541; Sullivan 1999: 120). Often, the businesses do not know where to find information and much time is spent on finding the necessary information. Several studies show that as of yet, substantial saving of time and other costs has not been achieved. At the same time, entrepreneurs are optimistic and hopeful with regard to the future of the Internet (McMorrow 2000: 6). 580

3 Up-to-date information technology helps to create competitive advantages for the firm. Several studies have shown that the Internet is the most suitable source of information on the external environment. The Internet makes possible improvement of a firm s management in three areas. First, costs can be reduced as the speed, accessibility and precision of the information is improved. Second, it is possible to improve tactical management of the firm, especially communication with clients. Third, strategic management and planning of the firm is improved as there is better access to secondary information. Acquiring strategic information can improve especially the business competence of entrepreneurs, which can be considered to be one of the sources of competitiveness (Pawar et al 1997: 115; Reedy et al 2000: 13). This is the area where the government could help enterprises the most. Supporting the collection of data about the important areas of entrepreneurship and presentation it in the Internet enables the entrepreneurs to get the needed information with smaller time and financial costs. The government-supported web-sites should converge different sources of information - for example registers of companies from their own country and abroad that should facilitate the entrepreneurs to find new business partners or clients or also to control the background of existing or planned business partners. That kind of web-sites could also provide information about different fairs or give professional help with the problems in any kind of business activities or give information about the financial aid programs or business training courses etc. An important way to improve tactical management of a firm is publishing information on a web page. This helps the firm to start with e-business and to facilitate the control of information flow in order to support its image, also to conform to regulations on publication of information (financial reports etc) and to reduce communication costs in communicating with suppliers and customers. Despite the claim one could make based on several management and communication theories that the functions of marketing management and cost control should be on most prominent positions on firms web pages, studies show that at present, web pages mostly function to form the image of a firm. This is probably due to the relatively small volume of small enterprises business transactions and the need to introduce oneself on the market. (Dutta et al 1998: 547; Sullivan 1999: 207) This is also an area where the government could help the entrepreneurs. Smaller companies have rarely possibility to make their own web-page and therefore they also have less possibility to get found by potential clients or business partners. The possibilities were better if there were a register in some different languages (English, German, Russian or French) with the main data about all the companies in the country. In recent years, the volume of business transactions over the Internet has significantly increased and it will become an important key to success in coming years. Anon argues that in the next five years, all companies will be Internet companies, otherwise they would cease to be companies (Anon 1999: 18). Especially big opportunities and potential are seen in business-to-business (B2B) transactions. Bringing business activities to the Internet enables the firms to optimize business processes, to enter new markets more easily, create coalitions and reduce promotion costs. (Premkumar et al 1999: 468; Reedy et al 2000: 352; Markets 2001) 581

4 At the same time, entrepreneurs experience shows that while the Internet makes it possible to find the suitable specialist or business partner, it doesn t provide traditional contact with a person. The Internet can replace a phone or a fax machine, but cannot provide eye contact. In addition, inadequate identification of the partner, shortcomings of payment systems and insufficient security are mentioned as problems of E-business. Information technology specialists are currently working actively on these problems and the situation is likely to improve in coming years. For instance, electronic signatures will be implemented in the near future, which will increase security in the communication between partners. (Dou 1996: 292; McMorrow 2000: 6; Reedy et al 2000: 13) The Smelink Internet project Many Estonian institutions and enterprises are involved in the Smelink project. The Internet portal ( was set up by Estonian Regional Development Agency in co-operation with several other organizations. Development Department of Rapla County Government, enterpreneurship departments of five counties that participated in the project, students and teachers of Tartu University, Tallinn Technological University and Tallinn Pedagogical University helped to bring the project to the entrepreneurs. Altogether 252 businesses from five Estonian counties participated (see Figure 1). Tartu County 20% Other 8% Harju County 30% Järva County 14% Rapla County 13% Lääne County 15% Figure 1. Locational distribution of the businesses that participated in the Smelink.ee project 582

5 Most of the businesses that participated in the project were involved in agriculture, industry or trade. Other activities were also represented, such as catering, accommodation, construction, education, transportation etc. Half of the participating enterprises were very small, with at most five employees and only one-fifth of the participating enterprises employed more than 20 people. The number of employees in other enterprises ranged from 6 to 20. One half of the participants were active in cities and the other in rural areas. The Internet portal contains information on 12 topics, which cover the following areas necessary in firms activities: Starting business Business education, consulting and services Financing Education and personnel Marketing and export Cooperation and contacts Environment, quality and work environment Procurement and bidding Business development European Union Economic environment Public regulations The entrepreneur s Internet portal was introduced to enterprises by the information technology and economics students of universities. The training of entrepreneurs as a rule included a half-day Internet training in enterprises, which was repeated if needed. At the end of the training, a questionnaire study was carried out with participating enterprises, the aim of which was to get feedback on the project and to find areas which needed further development. A six-page original questionnaire was prepared, which contained 26 multiple choice questions, a special table to evaluate different areas covered by the Smelink.ee Internet portal and 5 open questions. Several multiple choice questions also included a possibility to state one s own opinion and comments. 232 questionnaires were filled and returned by the enterprises that participated in the project. The questionnaire concentrated on the Internet use in enterprises, training within the Smelink.ee project and the suitability and applicability of the created Internet portal and its sub-topics. The present article examines only the entrepreneurs general assessments on Internet use in business and their opinions on the content and necessity of the Smelink.ee support project. The questionnaire showed that Estonian small entrepreneurs consider the Internet in general very necessary for their enterprises (average assessment 3.5 points on a 4- point Likert scale where 1 marked absolutely unnecessary and 4 absolutely necessary). Positions were similar across different counties and varied only in the range of 0.3 points. Yet only 15% of the participating enterprises had their own web page, which is considerably below European average. In comparison with Swedish entrepreneurs, it can be said that Swedish entrepreneurs considered the Internet to be of about the same importance (Johansson 2000). 583

6 The need of Internet use in the firm s operations was emphasized by firm managers in all main economic sectors. The Internet was valued more highly in real estate and business services sector. (see Table 1). Table 1. Entrepreneurs assessment of the necessity of the Internet at present and its growth in coming years (points on Likert scale with the maximum point 4) Agri- Construction, Trade, Manu- Cate- Trans- Real Educaculture, renovafacturingpor- estate, tion, forestry electricittionring accommodation tation, warebusiness health care, housing services culture Current necessity of the Internet Rise in the need for Internet in the near future An even larger number of respondents predicted an increase in the necessity of the Internet within the next two years, the average evaluation was 3.4 points on a 4 point Likert scale where 1 marked will not increase and 4 - will have important increase. Entrepreneurs in rural areas predicted somewhat lower increase in the necessity of the Internet than those in cities. Analyzing the responses by counties, it became apparent that entrepreneurs in Läänemaa foresee the fastest growth in the necessity of the Internet and those based in Tartu and Harjumaa, the slowest. Of economic sectors, managers of enterprises active in the sector of transportation and communication were the most convinced that the Internet would become more necessary, while their current assessment of the necessity of the Internet was somewhat more modest compared with other economic sectors. The questionnaire also examined the entrepreneurs attitude towards the Internet as a possible source of information. The reliability of the Internet was rated quite highly a fifth of the respondents considered this source of information the most reliable. Only the reliability of personal contacts was valued more highly (see Table 2). We can see from Table 3 that the Internet was considered to be more reliable by entrepreneurs active in manufacturing and real estate and business services. Reliability of the Internet was rated the lowest in the sector of transportation, storage and communication, which also explains the relatively low evaluation given to the need for the Internet in this sector. 584

7 Table 2. The position and reliability of the Internet compared to other sources of information (% of enterprises who considered it as one of the most important and reliable) Counties Sources of Average Harju Lääne Rapla Järva Tartu information Personal contacts Internet Press Fairs, exhibitions Other enterprises TV and radio Also firms involved in the sectors of education, culture and health care considered the Internet relatively less reliable as a source of information. In transportation, storage and communication as well as in education, culture and health care, information obtained through personal contacts was valued significantly more highly. Table 3 The position and reliability of the Internet compared to other sources of information (% of enterprises who considered it as one of the most important and reliable) Agri- Construction, Trade, Manu- Cate- Trans- Real Educaculture, renovafacturingpor- estate, tion, forestrcitmoda- electritionring accomtation, busi- health ware- ness care, tion housing services culture Sources of information Personal contacts Internet Press Fairs, exhibitions Other enterprises

8 Looking at the ways in which the Internet was being used, it became evident that many small enterprises are interested in selling their products via the Internet (average rating 3.2 points on a 4-point Likert scale where 1 marked not interested and 4 as very interested ). At the same time, enterprises are somewhat less interested in buying goods from others over the Internet (2.8 points). Of counties, enterprises located in the Harju and Tartu counties have stronger than average interest in sales. Some small differences in interest with respect to e-business became apparent also across sectors (see Table 4). Enterprises active in the sectors of catering and accommodation and manufacturing were the most interested in sales. Enterprises active in trade, catering and accommodation were the most interested in purchases (see Table 4). Entrepreneurs interest in sales via Internet (points on Likert scale with the maximum point 4) Table 4 Selling activities Buying activities Agriculture, forestry Construction, electricity Catering, accommodation Trade, renovations Manufacturing Transportation, warehousing Real estate, business services Education, health care, culture The authors tried to find out whether the entrepreneurs were interested in the digital services that could be provided via Smelink.ee. Few of the respondents denied the usefulness of digital services (only 2% of the respondents considered it useless). Two-thirds of the respondents, however, were sure that the services provided via Smelink would be of practical value. Entrepreneurs from the Harju County were most interested in the potential digital services three-fourths of the respondents from that county found the services useful. The majority of the respondents mentioned search for a business partner and mediation of sales offers as interesting services. The entrepreneurs active in transportation and storage, agriculture and forestry, construction and electricity, trade and renovations, and real estate and business services sector were the most interested in the digital services. Less interested in the above-mentioned services were entrepreneurs active in the fields of education, health care and culture. 586

9 Table 5 Usefulness of digital services provided by the Smelink information portal (% of respondents) Average Urban area Rural area Harju Lääne Rapla Järva Tartu Useful Not useful Indifferent The information portal created under the Smelink project was considered as useful by most of the entrepreneurs questioned. The managers of firms dealing with catering and accommodation surprisingly showed the lowest interest in the information, although here also 69% of the respondents considered the Smelink.ee portal necessary (see table 6). Necessity for information contained in the Smelink web portal among enterprises (% of respondents) Table 6 Very useful Rather useful Agriculture, forestry Catering, accommodation Const- Trade, Manufacturing ruction, renovations electricity Transportation, warehousing Real estate, business services Education, health care, culture Co-operation and contacts was considered the most necessary subject. This field was mostly preferred by entrepreneurs from Harju County. Topics like European Union and Economic Environment were rated as unimportant (see Table 7). In the authors opinion, the entrepreneurs have not yet recognized the importance of these issues in their activities and thus considered these topics rather uninteresting. When exploring the usefulness of the topics listed in the Smelink information portal by fields of activity, the opinions are very different. Only the co-operation and contacts issue produced a rather similar result, but other fields showed remarkable differences. For example, the evaluation of usefulness given to the most popular field Co-operation and contacts ranged from 31% (given by firms active in catering and accommodation) up to 69% (real estate and business services). At the same time, 587

10 business development, marketing, exports and financing issues seemed significantly more important to the catering and accommodation enterprises than to real estate and business services enterprises (see Table 7). This shows that enterprises need different information and attention should be paid to the balance of the information listed in portal. Table 7. Most important topics in the Smelink information portal, by economic sector (% of respondents who considered the topic to be among the 3 most important ones) Agri- Construction, Trade, Manu- renovafactu- culture, forestry electricittionring Catering, accommodation Transportation, warehousing Real estate, business services Education, health care, culture Starting business Business education, consulting and services Financing Education and personnel Marketing and export Cooperation and contacts Environment, quality and work environment Procurement and Bidding Business development European Union Economic environment Public regulations The questionnaire was designed so that enough space was left for the entrepreneurs to give their answers and opinions in free form. This opportunity was often used and many respondents made useful remarks, supplements and suggestions. Project Smelink received mostly positive acknowledgements. The majority of the entrepreneurs rated the exploitation of information technology in the Smelink quite highly. 588

11 Conclusion In recent years, small entrepreneurship has gained more and more attention and support in European countries. Small entrepreneurship supports free competition through reducing monopolization of big companies and alleviating confrontation of employers and employees. Small businesses need state support for achieving equal position with big companies. The aid programs should foremost support the development of important databases that are free to use for all the entrepreneurs. It is also necessary to implement several assistance programs for supporting the development of information technology in small business. One of the broadest in this field, is the Smelink.se training and Internet project, introduced for the SME in Sweden. The aim of this project was to raise competitiveness of entrepreneurs through better access to strategic business information and expanded new business opportunities. Using Swedish experience, a similar project (Smelink.ee) was launched in Estonia in The authors used a specially designed questionnaire for studying the opinions on the Internet project of the entrepreneurs participating in this project. Next, we introduce the main remarks and suggestions made by the entrepreneurs to improve the project. The entrepreneurs were interested in getting as new and specific information as possible. The information portal should also have some new and additional subjects, such as architecture, construction, design, traffic plans, non-profit organizations, the exchange for small business, taxes, customs etc. Entrepreneurs would also accept the information stored in other databases, which, however, must then be correctly referred and easily accessible. Some of the databases are commercial and this was stressed as an important problem hindering the access to information. There were also several remarks concerning the technical side of the project. For example, use of keywords was suggested to simplify search for information. It was also suggested that the NETI search engines be taken as an example in improving the search engine of the Smelink.ee. In addition the menus of Windows Explorer and Siteplan links were also recommended as examples. In several entrepreneurs opinion it is necessary to improve connections with the analogous project in Sweden in order to access the Smelink.se databases and contacts, and to use it for contacting Swedish companies. There should also be more information on Estonian neighboring countries. The necessity of the detailed information in the fields of tourism, sewing industry, timber industry etc was particularly emphasized. Also, there is a need for business literature catalogues and collections of articles in relevant topics. A separate section for warnings, which brings out frequently made mistakes, should be created as well. Furthermore, there should be sample project for requesting support from SAPARD and bringing production into conformity with EURO requirements. 589

12 Estonian entrepreneurs have understood the potential of the Internet in raising the competitiveness, but often knowledge and possibilities are insufficient to employ the new technologies. First steps for helping small businesses in this field have already been made. Unfortunately, it is not possible to solve all the problems associated with information and entrepreneurship with the Smelink.ee information portal. The project can be regarded as successful and the objectives achieved only when entrepreneurs start to benefit from Smelink services. References 1. Anon, J. Business and the Internet. IEEE Engineering Management Review, Vol. 27, Issue 4, 1999, pp Dou, J.-M. French Small Business Information through the Internet: A Comparison with US Organizations. International Journal of Information Management, Vol. 16, No. 4, 1996, pp Dutta, S., Kwan, S., Segev, A. Business Transformation in Electronic Commerce: A Study of Sectoral and Regional Trends. - European Management Journal, Vol. 16, No. 5, 1998, pp Europe gets connected. Europe Media Net, ( 5. Internet Sector in Europe Halved in Value. Nua Internet Surveys, ( 6. Jemmeson, P. Using the Internet for Competitive Advantage. Industrial Management and Data Systems, Vol. 97, Issue 3-4, 1997, pp Johansson, K. Project Smelink in Sweden - the Past, the Present and the Future. Presentation on the final conference of the project Smelink.ee in Paide, 21 Sept Markets and Exchanges: UK Leads in B2B Commerce [ Jan McMorrow, E. E-Commerce as a Tool. Facilities Design and Management, Vol. 19, Issue 12, Dec, 2000, p Pawar, B. S., Sharda, R. Obtaining Business Intelligence on the Internet. Long Range Planning, Vol. 30, No. 1, 1997, pp Premkumar, G., Roberts, M. Adoption of New Information Technologies in Rural Small Businesses. Omega, The International Journal of Management Science, Vol. 27, 1999, pp Reedy, J., Schullo, S., Zimmerman, K. Electronic Marketing: Integrating Electronic Resources into the Marketing process. The Dryden Press, Harcourt, Inc Sullivan, J. What are the Functions of Corporate Home Pages? Journal of World Business, Vol. 34, No. 2, 1999, pp Worldwide Internet Population. Commerce Net Research Centre, ( 590

13 Kokkuvõte INTERNETI KASUTAMINE ETTEVÕTETES (SMELINK NÄITEL) Kulno Türk, Maive Suuroja Tartu Ülikool Väikeettevõtted vajavad riigipoolset toetust suuremate ettevõtetega võrdväärse positsiooni saavutamiseks. Seepärast on ka Euroopa Liidu riikides loodud palju abiprogramme väikeettevõtjate infotehnoloogilise arengu toetuseks. Eestis on käivitatud ligi kolmkümmend väikeettevõtlust toetavat programmi. Üheks ulatuslikumaks neist on Rootsis aastal loodud väikestele ja keskmise suurusega ettevõtetele mõeldud internetiprojekt Smelink.se, mille eesmärgiks oli ettevõtjate konkurentsivõime tõstmine strateegilise äriinfo kättesaadavuse parandamise ja uute ärivõimaluste avardamise kaudu. Rootsi kogemustele tuginedes loodi aastal Smelink.ee ka Eestis. Nimetatud projektis osalenud ettevõtjate arvamusi ja hinnanguid uuriti autorite poolt spetsiaalse ankeetküsitluse käigus. Eesti ettevõtjad avaldasid soovi võimalikult uue ja konkreetse info saamiseks interneti vahendusel. Olulise probleemina nähakse osade andmebaaside tasulisust, mistõttu info saamine on raskendatud. Ettevõtjad tegid mitmeid märkusi projekti Smelink.ee tehnilise teostuse osas. Soovitati lihtsustada info leidmist märksõnade abil ning täiustada otsingumootoreid. Eeskuju soovitatakse võtta Windows Explorer'i tüüpi menüüdest ja Siteplan linkidest. Vajalik oleks tihendada sidemeid Rootsi analoogse projektiga, võimaldamaks pääsu Smelink.se andmebaasi. Ka Eesti teiste naaberriikide kohta peaks märksa rohkem infot olema. Eraldi rõhutati vajadust üksikasjalikuma info järele turismi, õmblustööstuse, puidutööstuse jt. valdkondades. Vajalikud on ka ettevõtlusalase kirjanduse kataloogid ning aktuaalsete teemadega seotud artiklite kogud. Luua võiks ka nn. hoiatuste rubriigi, kus tuuakse näiteid ettevõtjate eksimuste ja enamlevinud vigade kohta. Interneti leheküljel võiks olla ka näidisprojektid raha taotlemiseks Sapard'ilt ning tootmise EURO nõuetega kooskõlla viimise kohta. Ettevõtjad mõistavad ja aktsepteerivad Interneti võimalusi, kuid sageli puuduvad väikeettevõtetel võimalused ja oskused uue tehnoloogia rakendamiseks. Esimesed sammud väikeettevõtjate toetuseks sel alal on tehtud. Kahjuks pole aga Smelink'i infovärava või mõne teise analoogse andmebaasi abil võimalik veel lahendada kaugeltki kõiki infoga seotud probleeme. Autorite arvates tuleks analoogsete projektidega jätkata ning jõuda ka reaalaselt tunnetatavate ja mõõdetavate tulemusteni Interneti kasutamisel ettevõtluses. Selleks on vajalik jätkata riigipoolset tuge vastavate andmebaaside väljatöötamisel ja nende kasutamise tõhususe hindamisel. Riik peaks tagama ka andmebaasides esitatud info tasuta kasutamise võimaluse kõigile ettevõtjatele. 591

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