If a small business is going to survive it must be competitive. Internally, efficient operations will contribute to lower costs. A positive environment will allow employees to gain and apply the necessary skills. Management knowledge of information systems will provide leadership. Externally, the establishment of knowledge acquisition networks will facilitate the novel use of information systems. This chapter discusses how a strategy which integrates all of the small business resources, especially those related to information systems, will improve performance. An overall customer orientation applying internal resources and accessing external knowledge will contribute to competitive advantage.
TopA competitive advantage is gained when a small business, relative to other small businesses, becomes more efficient or acquires increased bargaining power over it competition. Researchers have investigated how information technology can contribute to competitive advantage (Bakos & Treacy, 1986).
Porter (1985 and 1998) suggested that competitive advantage may be achieved through a strategy of having lower costs or being different than other small businesses. Lower costs mean the small business is relatively more efficient than competitors and thus is better able to produce quality goods and/or services at prices which prevail in the market. A differentiation strategy means the small business can produce goods and services which are unique or superior resulting in the ability to charge a premium price creating higher profits.
Feindt et al (2002) suggest that most small businesses do not grow. They reported that only 3% of small businesses grow beyond the first few years after start-up.
There are many factors that contribute to small business success.
Successful SMEs place greater emphasis on soft issues (people) than hard issues (technology, structure). The management skills and concepts of the founders are deemed much more important than their technical skills. Employee skills are of crucial concern and can be most effectively developed in a nurturing working environment. Nevertheless the impact of business founders on organisational success remains the leading factor.(Feindt et al, 2002, p. 53)