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www.ajbms.org Asian Journal of Business and Management Sciences ISSN: 2047-2528 Vol. 3 No. 02 [13-28] ©Society for Business Research Promotion | 13 The impact of Information Communication Technology (ICT) on business Growth strategies of Small and Medium-scale Enterprises (SMEs) in the Awutu-Senya East Municipality of Central Region of Ghana Ben Ebo Attom Lecturer, Department of Accountancy Studies, Cape Coast Polytechnic Cape Coast Ghana, West Africa E-mail: [email protected] ABSTRACT In recent times, the pivotal role played by Small and Medium-scale Enterprises (SMEs) in Ghana cannot be overemphasized. They are frequently credited with engineering the socio-economic development through employment creation and poverty alleviation. Hitherto, these enterprises faced avoidable challenges caused by poor information management coupled with non-compliance with information communication technological (ICT) innovations. The general perception is that owners as well as managers of these enterprises willfully fail to embrace ICT innovations and programs that can easily turnaround the fortunes of their enterprises. The 21st century world is fondly referred to as a ‘global village’ with ICT being crucial in business undertakings. Spontaneously, it also creates business opportunities across geographical boundaries to enhance globalization. It is pretty obvious that in modern world of business, there is a speedy interdependence between a firm’s ability to use information technology effectively and its ability to implement business strategies and to achieve business goals. This paper examines survey results on the impact of ICT on business growth strategies and profitability of SMEs by using a survey of 162 enterprises classified as small-scale (121) and medium-scale (41) enterprises within the Efutu-Senya East Municipality (mainly Kasoa and its environs) of Central Region of Ghana. Overall, the study revealed that majority of SMEs (73.29%) studied do not make use of ICT and this to a greater extent has had a negative effect on their growth potential and success. A shocking proportion of about 27% of SMEs use ICT in their businesses but further maintained it is too expensive to operate. The study recommends capacity building for SME operators about the benefits of ICT in their business processes coupled with sensitization about its use, would invariably turn the fortunes of their enterprises. Keywords: Information communication technology (ICT), computerized inventory control system; customer relationship management (CRM), and transaction processing system (TPS). INTRODUCTION The 21 st century has embraced itself with ICT as one of the driving forces behind accelerated business growth in the world. According to French (1996), Information technology (IT) is defined as any technology which supports activities involving the creation, storage, manipulation and communication of information; together with their related methods, management and application. ICT is a fundamental ingredient for globalization as hinted by Samuels, et al. (1990) that, computer trading has therefore, made global markets technically possible. It is evident that ICT has brought immense innovations, improvements and advanced ways of doing business in a speedily manner in the developed economies. According to Kalakota, R. and Marcia (2001), technology is no longer an afterthought in forming business strategy,

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www.ajbms.org Asian Journal of Business and Management Sciences

ISSN: 2047-2528 Vol. 3 No. 02 [13-28]

©Society for Business Research Promotion | 13

The impact of Information Communication Technology (ICT) on business

Growth strategies of Small and Medium-scale Enterprises (SMEs) in the Awutu-Senya East Municipality of Central Region of Ghana

Ben Ebo Attom

Lecturer, Department of Accountancy Studies,

Cape Coast Polytechnic

Cape Coast

Ghana, West Africa

E-mail: [email protected]

ABSTRACT In recent times, the pivotal role played by Small and Medium-scale Enterprises

(SMEs) in Ghana cannot be overemphasized. They are frequently credited with engineering the socio-economic development through employment creation and poverty alleviation. Hitherto, these enterprises faced avoidable challenges caused by poor information management coupled with non-compliance with information communication technological (ICT) innovations. The general perception is that owners as well as managers of these enterprises willfully fail to embrace ICT innovations and programs that can easily turnaround the fortunes of their enterprises. The 21st century world is fondly referred to as a ‘global village’ with ICT being crucial in business undertakings. Spontaneously, it also creates business opportunities across geographical boundaries to enhance globalization. It is pretty obvious that in modern world of business, there is a speedy interdependence between a firm’s ability to use information technology effectively and its ability to implement business strategies and to achieve business goals. This paper examines survey results on the impact of ICT on business growth strategies and profitability of SMEs by using a survey of 162 enterprises classified as small-scale (121) and

medium-scale (41) enterprises within the Efutu-Senya East Municipality (mainly Kasoa and its environs) of Central Region of Ghana. Overall, the study revealed that majority of SMEs (73.29%) studied do not make use of ICT and this to a greater extent has had a negative effect on their growth potential and success. A shocking proportion of about 27% of SMEs use ICT in their businesses but further maintained it is too expensive to operate. The study recommends capacity building for SME operators about the benefits of ICT in their business processes coupled with sensitization about its use, would invariably turn the fortunes of their enterprises. Keywords: Information communication technology (ICT), computerized inventory control system; customer relationship management (CRM), and transaction processing system (TPS).

INTRODUCTION

The 21st century has embraced itself with ICT as one of the driving forces behind accelerated business growth in the world. According to French (1996), Information

technology (IT) is defined as any technology which supports activities involving the creation,

storage, manipulation and communication of information; together with their related

methods, management and application. ICT is a fundamental ingredient for globalization as hinted by Samuels, et al. (1990) that, computer trading has therefore, made global markets

technically possible.

It is evident that ICT has brought immense innovations, improvements and advanced ways

of doing business in a speedily manner in the developed economies. According to Kalakota,

R. and Marcia (2001), technology is no longer an afterthought in forming business strategy,

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ISSN: 2047-2528 Vol. 3 No. 02 [13-28]

©Society for Business Research Promotion | 14

but the actual cause and driver. Hence, currently, the use of information system resources

such as computers, internet, e-business, point of sales (POS) and other ground-breaking

business practices is a common feature of SMEs in the advanced world. The modern business environment is not only complex but also extremely dynamic interminable and

with cutting edge improvement characterized by multifaceted customer needs and wants

that must be met with accuracy and momentum in order to ensure the survival and growth

of small and medium scale business activities. According to Laudon and Laudon (2010),

information technology is one of the important tools that managers (businesses) use to cope

with change.

The business terrain is thus, controlled by strict compliance with ICT innovations through

networking, internet connectivity and improved information communication flow.

Information communication is so vital in today’s business environment and thus, firms are

nowadays encouraged to invest heavily information system and technology. The need to adopt state-of-the-art ICT innovations to enhance the business development processes by

SMEs to improve efficiency, profitability and growth potential is inevitable.

It is upon this backdrop that this study is being conducted to adequately appreciate the

impact of information communication technology on the operations of SME operators in

Ghana.

STATEMENT OF THE PROBLEM

It is indeed an open secret that the contemporary business practices and environment are

heavily influenced by information communication and technological changes. In order words ICT is currently perceived as the engine of innovations and growth for modern

business practices with SMEs as no exception to this disposition.

It is surprising however, to note that despite the enormous benefits derived from ICT in the

field of business, trade, industry and commerce, in Ghana it is widely speculated by social

commentators and stakeholders that most SME business operators hardly embrace the immeasurable advantages of ICT in their businesses. Again it is not yet that most SMEs

have experienced thwarted or no growth due to non-compliance to ICT. In all these several

reasons ranging from high ICT illiteracy levels of SME operators, cost implications with ICT

and poor infrastructural development have been forwarded as some operators’ disposition

for not using ICT.

With all the above into perspective, this paper attempts to find answers as to why SME

operators in Ghana determinedly fail to harmonize their business operations with ICT order

to reap the incalculable benefits that accrue to the adoption of ICT in their business

operations.

OBJECTIVES OF THE STUDY

The study’s objectives can be categorized mainly into specific and general objectives. The

general objective of the study is to ascertain the important role played by ICT in

contemporary businesses. The specific objectives of the study include the following:

To ascertain level or number of SMEs currently using ICT in their business operations;

To ascertain the extent to which ICT can improve the business developmental agenda of SMEs through investment in sound ICT programs and infrastructure;

To critically examine specific benefits associated with the adoption of ICT in their business operations. For instance how ICT can effectively help to gather information

about customers of SMEs and to bring about good customer relations;

To examine also, how ICT can bring efficiency in data and information gathering by SMEs;

To identify the contribution of ICT to the stock management and control procedures of SMEs; and

To examine how the initial high cost of ICT implementation can be catered for by SMEs in Ghana in order to set up and operate their own ICT system.

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SIGNIFICANCE OF THE STUDY

The desire to investigate into the impact of ICT on the business development agenda and profitability of SME’s was prompted by results of a sample survey that was conducted

among SME’s through random selection. These SME operators hinted that they have not

taken full advantage of ICT even though it is considered the major driving force behind

contemporary business success.

Modern business processes and practices are mainly driven by ICT and that its contribution to the development of SME’s cannot be overstated. Findings from the study would enable

SME’s to embrace the use of ICT in their business development agenda. The government

can also rely on the findings to initiate policy guidelines that can help accelerate the

development of SME’s in Ghana in order to facilitate the growth of the private sector as an

engine of growth.

ASSUMPTIONS AND HYPOTHESIS

The following are assumptions underpinning the study, that:

The sample size chosen from SME operators is representative enough to enable the

researcher arrive at credible conclusions of the study;

ICT has a direct correlation with growth and innovations in the business processes of

SME businesses;

Most of the SME operators are not taking full advantage of ICT in their business

processes; and

ICT resources can help re-position micro and small business in their business

development agenda in Ghana.

LITERATURE REVIEW

An overview of Information Communication Technology (ICT)

The ability of small and medium-scale business operators to respond rapidly and appropriately to the environmental challenges depends largely on the information systems

management to reflect hopes, dreams and realities of real business situation. A substantial

portion of business operator’s responsibility lies in his creative abilities driven by new

knowledge and information. Information communication technology therefore, plays a

crucial role in helping small and medium-scale business operators to design and deliver

new products and services with unique features and redirecting and redesigning their business processes to meet current changes.

Information technology involves technology that supports the activities involving the

creation, storage manipulation, sharing and communication of information through

information system resources such a computers. Laudon and Laudon (2010) define ICT to refer to all hardware and software technologies a firm needs to achieve its business

objectives.

Small and medium-scale enterprise require information technology infrastructure to provide

a solid platform on which their business processes can be built to meet the dynamic

business environment they find themselves. Information technology infrastructure can be said to include computer hardware, software, data, storage technology, and networks

providing a portfolio of shared IT resources for the enterprise.

Information Communication Technology and Business Process enhancement

Business process according Laudon and Laudon (2010) is defined as the unique ways in

which organizations coordinate and organize work activities, information and knowledge to

produce a product or service. For the purposes of the study this study the processes that

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would be largely be involved by small and medium scale enterprises, as per the definition of

business process will include:

Manufacturing and production such as assembling of products, and checking for high

quality standard;

Sales and marketing which involve identifying customers, creating awareness for the

product or service and the actual selling of the product or service;

Finance and accounting functions such as payment to creditors, payroll activities,

generation of financial statement and cash management procedures; and

Human resource management functions such as recruitment processes, performance

evaluation and employee database maintenance.

From the foregoing analysis it is clear and unequivocal that information communication

technology can influence the business processes of small and medium scale enterprises by

way of automating the various processes and activities outlined above to facilitate speedy

and error-free processes coupled with high degree of accuracy.

Information Communication Technology and SME Support Systems

Typically small and medium-scale enterprises have a systems supporting process for each

of the various functional areas for sales and marketing, manufacturing and production,

finance and accounting and human resource management. These systems help to support the decision making needs of small and medium-scale enterprises.

The need to keep track of the elementary business activities and transactions of business

enterprises such as sales report; cash receipts; cash deposits; and payroll activities require

the efficient implementation of ICT resources. Business support systems are best

implemented where a sound and dynamic ICT capability is established.

Transaction Processing Systems (TPS)

This is one of the most reliable ICT systems used by small and medium scale enterprises at

the operational level, mostly in the retail industry. Operational managers and supervisors need systems that can keep track of basic activities and transactions of the enterprise.

Such transactions include sales; receipts; cash deposits; and credit assessment and control

decisions.

Transaction support system according to Laudon and Laudon (2010) is a computerized

system that performs and records the dairy routine transaction necessary to conduct business such as:

Sales order entry using point-of-sales (POS) machines, where bar codes of products are

scanned for payment by customers;

Employee records keeping in the of data base management system (DBMS); and

Payroll services.

Reports can easily be generated by the transaction support systems in an accurate manner to support the decision-making process in the enterprise.

Customer Relations Management (CRM) system

Customers of small and medium-scale enterprises occupy a unique position that determines the success or failure of the enterprise. Customers can therefore, serve as the

determinant for the accomplishment of the organizational goal of the enterprise. Customer

relationship management (CRM) systems assist small and medium-scale enterprises to

effectively manage their relationship with their cherished customers. Cronin (1996) hints

that the driving force behind world economic growth has changed from manufacturing

volume to improving customer value, hence, the high premium attached to customer relations management. It therefore, provide cutting-edge information to synchronize all the

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business processes that deal with customers in sales, marketing and service with the view

to capitalize on profitability, customer satisfaction and retention aimed at securing a

competitive urge over the competitors.

O’Brien and Marakas (2010) defines CRM system as, a cross-sectional e-business

application that integrates and automates many customer serving processes in sales, direct

marketing accounts and order management, and customer service and support.

According to Norris et al. (2000) managing the full range of the customer relationship

involves two related objectives of providing the organization and all of its customer-facing

employees with a single, complete view of every customer at very touch point and across all

channels and also to provide the customer with a single, complete view of the firm and its

extended channels.

CRM systems are very effective ways to consolidate and integrate customer information from multiple communication channels such as telephone, electronic mails, wireless

devices, retail outlets or the World Wide Web (the so called www). This enables small and

medium-scale enterprises to detail out accurate knowledge about customers and their

preferences to support improvements in marketing strategies and quality customer service

and support.

Computerized Inventory Control System

Businesses that embrace ICT in their business process usually employ computerized

inventory control system. A computerized system according to Brigham and Houston (1999)

is a system of inventory control in which a computer is used to determine reorder points and adjust inventory balances. A computerized inventory control system requires that a

computer to count inventory in its memory such that as withdrawals are made, they are

recorded instantly by the computer and the inventory balance is equally revised. In likewise

manner a reorder level is reached for any particular inventory, the computer automatically

places an order, such that when the order is received, the recorded balance of the inventory is increased. This system of inventory control is very dynamic and time-saving and SMEs

are assured of accurate stock balances that they are able to track the movements of

inventory. This enables for the right marketing strategy to adopt in slow and fast moving

inventory and also to check over-stocking and under-stocking.

Internet, Interactive Marketing and Business Processes

The internet is one of the modern marketing tools for SMEs to market their products and to

enhance business processes. It has an important impact on marketing of goods and

services and to establish relationships among many firms (including SME’s) and external

entities of small and medium-scale enterprise.

Keen and Craigg (1999) state that business managers are moving from tradition where they

could avoid, delegate, or ignore decisions about IT to one where they cannot create a

marketing, product, international, organization, or financial plan that does not involve such

decisions.

Marketing information systems provide information technologies that support major

components of the marketing function. Interactive marketing process facilitates a situation

where customers are partners in creating, marketing, purchasing and improving products

and services delivery. Also, a global sales force via the internet can effectively receive instant

product price information. No wonder many businesses including small and medium-scale enterprises are speedily rebuilding some of the key business processes based on Internet

technology and making ICT a key component of their operational requirements.

The internet is also known for its ability to increase accessibility, storage and distribution of

data, information and knowledge for the enterprises. It also has the capability to lower

transaction costs facing SME’s. For instance, a firm can deliver their internal operation

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procedural manual to their workforce at different locations by posting them on the firm’s

website to reduce delivery cost.

ICT in business and Accounting Functions

The business environment of SMEs is largely characterized by increased volume of

information processing procedures. The impact of having accurate of quality information

will enable business operators to make the right decisions regarding business strategies

and investment decisions that aim at ensuring business growth and development.

Commonly, the significant information needs in making business decisions centre around

quality financial and accounting information generated by the business operators. It is

worth noting that ICT can give critical impact on financial reporting. The accounting cycle is

largely influenced by ICT through:

Data capturing or entry such as point-of-sale machines;

Data processing by way of classifying, arranging and calculating; and

Output in the form financial report such as income statement and position statement.

Chart of accounts (means of decoding accounting information into programmable language)

enables for economic transaction to be captured using recognizable accounting software to

generate financial information (feedback).

ICT and Financial Control and Reporting

Businesses, especially SME’s thrive well when their business processes are recorded and

reported timely. Generally ICT is considered one of the most reliable means of providing a

strong platform for effective system of internal control over financial reporting. It stands to

reason that a sound ICT system provides a sure and guarantee medium of financial

information delivery that covers the entire accounting cycle of the firm. ICT creates a conducive atmosphere that integrates all financial transactions with the help of accounting

software to generate financial report which hitherto, would have very difficult to prepare.

O’Brien and Marakas (2010) hinted that Accounting information systems are the oldest and

the most widely used information system in business. Computer-based accounting systems record and also generate report on cash flow through an organization on a historical basis

and produce important financial forecasts of future conditions. ICT has therefore made the

problem faced by SME’s in generating accurate accounting information, a thing of the past.

Hence, SME businesses and operators with significant ICT deficiencies are most likely to

face the problem of misstated financial information.

METHODOLOGY

The study was conducted among SMEs operating within the Efutu-Senya East Municipality

(mainly Kasoa and its environs). The study population was grouped into six clusters based

on their Geographical location and they include: Kasoa Old Market, Kasoa New Market, Kasoa CP & Abaase, Kasoa Melcom, Kasoa Ofankor and Nyenyano). The clusters (centres)

were identified in a reconnaissance study to be the main commercial centres with vigorous

commercial activities and also with the right mix of SME dominance. The study was

meticulously conducted on a cross-section of SMEs within the aforementioned clusters. A

purposive probability sampling technique was employed to select a sample size of one

hundred and eighty (180) respondents drawn from a cross section of SMEs ranging from retailing, wholesaling, distribution, manufacturing, construction and service sectors of the

economy of Ghana. The main tool for data collection was structured questionnaires (both

open-ended and close-ended). The questionnaire centered on the ICT knowledge level of

SME operators, adoption and usage of ICT support systems and the reasons why some SME

operators fail to incorporate ICT delivery systems in their businesses to consequently

improve their growth strategies. In some limited cases, where the educational level of the respondents was a drawback, interview schedule was adopted to overcome such limitation.

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Three research assistants were deployed to administer questionnaires to respondents in the

six clusters. Out of the 180 questionnaires administered, 162 responded and this

represented 90% response rate. From Table 1, Kasoa Old Market recording the highest response rate of 96.49% with the lowest response rate of 76% recorded at Nyanyaano.

Table 1 Summary of Questionnaires Distribution and Collection

Name of

Area

Questionnaires

Distributed

Questionnaires

Collected

Response

Rate (%)

Kasoa New Market 28 27 96.43

Kasoa Old Market 57 55 96.49

Kasoa Ofankor 32 28 87.50

Abaase & CP 26 21 80.77

Kasoa Melcom 12 12 100.00

Nyanyaano 25 19 76.00

Total 180 162 90

Source: Field work, July 2013

Sample Size determination

A simple mathematical approach to sample size determination was adopted by the

researcher. Using a confidence level of 93.50% a sample of 162 respondents were chosen

from an estimated population of seven hundred and ninety-seven (797) small and medium-

scale enterprises operating within the Kasoa and its environs. Given a margin of error of

6.50% the sample size was calculated as: N

1+ N (e) 2

Where;

Total number of SME operators (N) is given as 751;

Confidence level = 93.50%; and.

Margin of error (e) = 6.50%. = 751

1+751(0.065)2

= 751

1+3.173

Sample size = 180 small and medium-scale enterprises.

RESULTS AND DISCUSSIONS

Questionnaires collected were carefully edited to check for completeness of the data

provided by the respondents. Data were analyzed as follows:

Number of Years in Business

Businesses are established to grow and expand see the foreseeable future. It generally

known that the early years in business are very tumultuous. New enterprises are mainly

faced by the ever changing and complex business environment that requires tough decisions by the operators largely based on their experience and to some lesser extent luck.

The number of years in business normally determines one’s level of exposure and

experience in the field of commerce.

As indicated in Table 2, majority of small-scale enterprises (52.89%) have been in business

for between 1 to 5 years, whereas, in respect of medium-scale enterprises a greater number (36.59%) have being in existence from 5 to 10 years. It is also evident that fewer enterprises

(from both small and medium-scale) representing 11.75% and 9.76% respectively have been

in business for over 10 years.

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Table 2: Number of years in business of SMEs

Type of

Business unit

Under 1yr. 1-5yrs. 5-10yrs Above 10yrs. Row Total

No. % No. % No. % No. % No. %

Small-scale 22 18.18 64 52.89 21 17.36 14 11.57 121 59.88

Medium-scale 9 21.95 13 31.70 15 36.59 4 9.76 41 40.12

Sample Size 31 19.14 77 47.53 36 22.22 18 11.11 162 100

Source: Field work, July 2013

Type of Ownership of SMEs

A range of businesses can be formed by SME operators in Ghana. This study sought to

confine itself to the commonest businesses that are mainly operated in Ghana. SME

operators usually form and operate a number of businesses based on a number of reasons

such as; size of capital, flexibility, convenience and legal requirement. Most of these

businesses are formed and operated by single individuals known as sole proprietors. From Table 3, out of a total of about 121 small-scale enterprises, 80.17% are classified as sole

proprietors. On the other hand however, most medium-scale enterprises used for study

(56.10%) categorized as Partnership businesses with only a meager proportion (12.20%)

classified as sole proprietorship enterprises.

Table 3: Type of Business Ownership of SMEs

Type of Business

Ownership

Types of Business Units

Small-scale Medium-scale Row Total

No. (% ) No. (% ) No. (% )

Sole Proprietorship 97 80.17 5 12.20 102 62.96

Partnership 15 12.40 23 56.10 38 23.46

Private Company 9 7.43 13 31.71 22 13.58

Sample 121 74.69 41 25.31 162 (100)

Source: Author’s Field work, July 2013

0

10

20

30

40

50

60

70

Under 1yr 1yr - 5yrs 5yrs -10yrs Above 10yrs

Years in Business

Small-scale

Medium-scale

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Micro and Small-scale Operators’ Educational Background

Formal education plays a vital role in the modern dynamics of business. Undeniably, the

educational level of SME operators, irrespective of its nature is a major requirement for

business success. It enables SME operators to understand the modern business

environment and to be in a good position to formulate strategies that can put them ahead of

their competitors and offer them a competitive urge to outpace them. Generally, in Africa

the high degree of illiteracy level has a serious drawback on businesses. Data gathered as shown in Table 4 however, indicates that nearly 91% of small-scale business operators

and have had some basic level of formal education. It is also known that at least 95% of

SME operators classified as medium-scale enterprises have had a basic formal education,

with over 41% of them having had a formal secondary education.

Table 4: Educational Background of SMEs Operators/Managers

Highest Educational

Level

Types of Business Units

Small-scale Medium-scale Row Total

No. (% ) No. (% ) No. (% )

No- education 11 9.09 2 4.88 13 8.02

Basic 48 39.70 12 29.27 60 37.04

Secondary 31 25.62 17 41.46 48 29.63

Tertiary 20 16.53 7 17.07 27 16.67

Professional (ICA/ ACCA)

9 7.43 2 4.88 11 6.79

Master/PHD 2 1.65 1 2.44 3 1.85

Sample Size 121 (74.69) 41 (25.31) 162 (100)

Source: Field work, July 2013

Type of Industries Operated by Micro and Small-scale Enterprises

The nature of industry that the micro and small-scale operators find themselves is of

crucial importance to the study. The business environment in Ghana is dominated by the activities of middlemen (retailers, wholesalers and distributors). This makes the activities of

middlemen vital in the determination of the overall determinant in business development

strategies. The greater number of small-scale and medium-scale operators as middlemen

0

20

40

60

80

100

SoleProprietorship

Partnership PrivateCompanies

Type of Business Ownership

Small-scale

Medium-scale

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makes it one of the most competitive business industries in Ghana. As indicated in Table 5,

a greater proportion (75.21%) of small-scale enterprises are classified as

middlemen(retailers, wholesalers and distributors) with manufacturing and construction and service sectors constituting about 12.96% and 8.64% and 3.7% respectively, of the

SMEs under study.

Table 5: Types of industry of the

Source: Field work, July 2013

Retail 39%

Wholesale 22%

Distribution 15%

Manufacturing 12%

Construction 8%

Service 4%

Small Scale Enterprises

Retail 37%

Wholesale 19%

Distribution 17%

Manufacturing 15%

Construction 10%

Service 2%

Medium-scale Enterprises

Type of

Industry of SMEs

Types of Business Units

Row Total Small-scale Medium-scale

No. (% ) No. (% ) No. (% )

Retail 47 38.34 8 19.51 55 33.95

Wholesale 26 21.49 15 36.59 41 25.31

Distribution 18 14.88 7 17.07 25 15.43

Manufacturing 15 12.40 6 14.63 21 12.96

Construction 10 8.26 4 9.76 14 8.64

Service 5 4.13 1 2.44 6 3.70

Sample Size 121 (74.69) 41 (25.31) 162 (100)

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Knowledge about ICT

Knowledge about ICT is crucial to small and medium-scale enterprise operators in order to take full advantage of the benefits derived from the implementation of ICT infrastructure.

The generally known that ICT is the driving force behind business successes in the twenty-

first century. Hence, the survival and growth strategies of SMEs should take cognizance of

ICT innovations in order to gain competitive urge over their rivals. Surprisingly Table 6

indicates that most of the small and medium-scale enterprise operators (72.50%) under

investigation have no knowledge about ICT innovations. Data available also, indicates that 88 out of 119 (representing almost 74%) of the small-scale enterprises under investigation

do not have any form of knowledge about ICT.

Table 6: Knowledge about ICT

Type of

Business

unit

Knowledge about ICT No Knowledge about

ICT Row Totals

No. (% ) No. (% ) No. (% )

Small-

scale

31 26.05 88 73.95 119 74.38

Medium-scale

13 31.71 28 68.29 41 25.63

Sample

Size

44 27.50 116 72.50 160 (100)

Source: Field work, July 2013

Use of ICT Support System by SMEs

As it has been pointed out earlier on the existence of ICT infrastructure is a prerequisite for

modern business expansion and growth strategies of SMEs. The use of ICT has far reaching

benefits that must be tapped by SMEs in their quest to sustain their competitive advantage.

SMEs must devout particular attention to sound ICT infrastructure base that will fully support the business growth strategies that will support the achievement of the goals and

objectives. The use of ICT can conveniently provide an enduring advantage business

advantage. As hinted by Laudon and Laudon (2010) that in the advance world businesses

are rapidly rebuilding some of their key business processes based on internet technology

and making this technology a key component of their IT infrastructure. From Table 7, the study revealed that 74.79% of small-scale enterprises and 69.05% of medium-scale

enterprises in the study area do not use any ICT support system. This is alarming in the

sense that these proportions of SMEs cannot enjoy the benefits derived from ICT

innovations. Using the industry averages, 76% of small and medium-scale enterprises do

not use ICT support system.

0

20

40

60

80

100

Knowledge of ICT No Knowledge of ICT

Knowledge of ICT

Small-scale

Medium-scale

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Table 7: Use of ICT Support System

Type of

Business

unit

Usage of ICT System Non- Usage of ICT

System Row Totals

No. (% ) No. (% ) No. (% )

Small-

scale

30 25.21 89 74.79 119 73.91

Medium-

scale

13 30.95 29 69.05 42 26.09

Sample Size

43 26.71 118 73.29 161 (100)

Source: Field work, July 2013

Reasons for not using ICT Infrastructure

Various reasons were assigned by the SME with respect to their reluctance to use ICT to

enhance their business processes given the invaluable benefits assigned to its adoption by business enterprises. The study revealed some of the reasons as indicated by Table 8. Data

gathered revealed that greater proportions of both small-scale and medium enterprise

operators (representing 47.93% and 46.34% respectively) attributed their reasons for not

using ICT support system to ignorance about ICT benefits. Small-scale enterprises assigned

35.54% of their reasons to high cost ICT gadgets and maintenance whereas only 19.51% of medium-scale enterprises assign the same reasons. Medium-scale enterprises allotted

31.71% of the reasons to lack of qualified ICT personnel.

Table 8: Reasons for not using of ICT Support System

Reasons for not using

ICT (%)

Small-scale Medium-scale Total

Freq. Percentage (%) Freq. Percentage (%) Freq. Percentage (%)

Ignorance about ICT benefits

58 47.93 19 46.34 77 47.53

High cost of ICT gadgets and maintenance

43 35.54 9 19.51 56 34.57

Lack of qualified ICT Personnel

18 14.88 13 31.71 26 16.05

Personal reasons 2 1.65 1 2.43 3 1.85

Sample Size 121 74.69 41 25.31 162 100

Source: Field work, July 2013

25%

75%

Small-scale

Use of ICT System Non-usage of ICT System

29%

71%

Medium-scale

Use of ICT System Non-usage of ICT System

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Transaction processing system (TPS)

The elementary activities and transactions of SMEs are tracked by the TPS. The TPS refers to the computerized system that performs and captures all the daily routine transactions

such sales order entry, payroll, and employee record keeping, necessary to conduct

business. TPS helps to monitor the status of internal operations and the firm’s relations

with the external world. TPS is undoubtedly one of ICT system that can effectively shape

and improve the business processes of SMEs with particular emphasis on speed, accuracy

and reliability. Table 9 indicates a disturbing scenario where majority of both small-scale and medium-scale operators (74.79% and 69.05% respectively) do not use TPS. It could be

deduced from the available data that lesser number of SMEs (24%) categorized as small-

scale use TPS as compared with medium-scale enterprises which has (27%) of TPS usage.

Table 9: Use of Transaction Processing System (TPS)

Type of

Business unit

Usage of TPS Non- Usage of TPS Row Totals

No. (% ) No. (% ) No. (% )

Small-scale 28 25.21 88 74.79 119 73.91

Medium-scale 11 30.95 30 69.05 42 26.09

Sample Size 43 26.71 118 73.29 161 (100)

Source: Field work, July 2013

Use of Customer Relationship Management (CRM)

The need to keep close relationship with cherished customers of SMEs is of vital importance

to the survival, growth and expansion strategies of these enterprises. The success or

otherwise of SMEs largely depends on the extent to which customers perceive the products and services. The desire to win the confidence and loyalty of customers is a must for SME

business operators who desire to expand their market share and to improve their business

relations. CRM helps SMEs to manage their relationship with their customers by providing

information to coordinate their business processes that relate to sales, marketing and

services to improve turnover, customer satisfaction and retention. From Table 10, huge

proportion of SMEs (88.05%) does not make use of CRM despite its critical importance. Only 11.95% maintain CRM to support their activities.

Usage of TSS 27%

Non-Usage of

TSS 73%

Medium-scale

Usage of TSS 24%

Non-Usage of

TSS 76%

Small-scale

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Table 10: Use of Customer Relationship Management (CRM)

Business

units

Usage of CRM Non- Usage of CRM Row Totals

No. (% ) No. (% ) No. (% )

Small-

scale

12 10.17 106 89.83 118 74.21

Medium-

scale

7 17.07 34 82.93 41 25.79

Sample

Size

19 11.95 140 88.05 159 (100)

Source: Field work, July 2013

Use of Computerized Inventory Control System

Tracking of inventory one of the major concerns of SMEs. As already hinted out that

majority of SMEs find themselves working as middlemen who mainly keep stock of goods

before making them available to the final consumer, hence, the need to keep an ideal and

accurate stock system is of paramount benefits to these enterprises. Using computerized inventory control system is critical to ensure accurate inventory reporting with respect to

minimum, maximum and re-order levels for the SMEs to steer clear of over or under

stocking. A computerized inventory control system requires that a computer does the

counting of inventory in its memory such that when withdrawals are made, they are

recorded instantly by the computer and the inventory balance is equally revised to establish the ideal inventory level. Table 11 indicates that majority (92.56% and 75.61%) for small

and medium-scale enterprises respectively do not use any computerized inventory system.

This is a very ugly picture about the SMEs since they fail to take full advantage

computerized inventory system. Mostly, retailers have failed in this regard since only 7.44%

of them use of ICT for their stock management and controls procedures.

Table 11: Use of Computerized Inventory Control System

Business

units

Use of Computerized

Inventory Control

System

Non-use of

Computerized

Inventory Control

System

Row Totals

No. (% ) No. (% ) No. (% )

Small-

scale

9 7.50 112 92.56 121 74.69

Medium-

scale

10 30.00 31 75.61 41 25.31

Sample Size

19 11.73 143 88.27 162 (100)

Source: Field work, July 2013

The role of ICT in Financial Reporting

Businesses are mandated to provide accurate, valid and reliable financial statements for its

stakeholders. Financial and accounting information flow is very fundamental to the strategic positioning of SMEs. ICT creates an enabling atmosphere that integrates all

financial transactions with the help of accounting software to generate financial reports

needed to influence the decisions of potential and existing investors. Timely and accurate

accounting information is invaluable to stakeholders of varied interest. Data available from

Table 12 gives a gloomy picture about SMEs with respect to the use of ICT in their financial control and reporting. Nearly 93% of small-scale enterprises fail to adopt ICT in their

financial and reporting functions. Also, 70% of Medium-scale enterprises do make use of

ICT in their financial and accounting reporting.

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Table 12: Using ICT in financial control and Reporting

Business

units

Usage of ICT in

financial Control and

reporting

Non-usage of ICT in

financial control &

reporting

Row Totals

No. (% ) No. (% ) No. (% )

Small-scale

9 7.50 111 92.50 120 75.00

Medium-

scale

12 30.00 28 70.00 40 25.00

Sample

Size

21 13.19 139 86.81 160 (100)

Source: Field work, July 2013

SUMMARY OF FINDINGS

The following summary of findings could be deduced from the data gathered for the study:

Majority of small-scale enterprises (52.89 per cent) have been in operation from 1 year to 5 years. However, with respect to medium-scale enterprises, most of them (36.59 per

cent) have been in business from 5 to 10 years;

Almost 75 per cent of SMEs used for the study are classified as small-scale businesses (with about 97 out of 102 of these enterprises representing 95.10 per cent categorized

as sole proprietorship). However, 25 per cent of the SMEs are labeled as medium-scale

enterprises of which 60.57 per cent are classified as partnership businesses;

Majority of SMEs (72.5 per cent) used for the study are characterized by the activities of middlemen (retailers, wholesalers and distributor);

Greater percentage of SMEs (nearly 73 per cent) under scrutiny does not have any knowledge about ICT innovations and how they can improve their business processes;

It was also clear from the data gathered that majority (almost 75 per cent) small-scale enterprises and 69 per cent of medium-scale enterprises do not operate any form of ICT

support system and can scarcely take advantage of it; and

Finally, majority of micro and small-scale enterprises (86.81 per cent) of SMEs do not use ICT in financial control and reporting. This is very alarming given the technological

advancement in the twenty-first century.

CONCLUSIONS AND RECOMMENDATIONS

From the foregoing summary of findings on can conveniently indicate a very worrying state

of affairs relating to the use of ICT to improve business growth strategies of SMEs in Ghana. The role of ICT in improving business delivery services and innovations in SME is

farfetched. ICT provides the bedrock on which SMEs can build their business information

systems aimed at improving their business processes, customer relations and efficient

delivery of goods and services to satisfy the needs of cherished customers. It is patently

clear from the findings that ICT infrastructure and innovations are insignificantly available

in SMEs. Reasons such as poor knowledge about ICT, lack of qualified personnel and high cost of implementation were mainly cited as the factors militating against the smooth

implementation of ICT resources. It is evident these SMEs are faced with severe growth and

expansion challenges in the modern world of business where ICT is the other of the day.

Most of the SMEs sampled for the study do not use ICT resources to enhance their business

growth strategies. This stifles the growth potentials of these businesses in developing economies with Ghana as no exception.

The following recommendations are made based on the findings:

Periodic training in the form of workshops and sensitization programs on the benefits and the use ICT resources in business growth strategies should be

organized by National Board for Small-Scale Industries (NBSSI) for SME operators to

create more awareness in order to enhance their preparedness to institute ICT

programs aimed at improving their business operations;

There should be a comprehensive effort to institute ICT training programs at the various levels of the educational hierarchy. ICT should also be made compulsory at

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©Society for Business Research Promotion | 28

the basic and second cycle schools to train more students to increase ICT technical

trainees and professionals to fill the ICT job market;

The government on its part, initiate special incentive schemes such as tax holidays, free computers and other ICT resources to encourage SME operators to readily accept to use these resources to improve their business activities;

A special loan scheme should be initiated jointly by the government and the various commercial and investment banks to provide easy access to credit facilities that will

absorb the initial high investment cost of implementing ICT project; and

Finally, SME operators, as a matter of urgency should outsource their ICT delivery systems by engaging ICT consultants in order to circumvent the problem of funding

relating to the setting up of their own ICT system which usually requires huge initial

capital outlay.

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French, C.S. (1996). Data Processing and Information Technology, London: Thomson

Learning Kalakota, R. & Marcia, R. (2001). E-Business 2.0 Roadmap for Success, Reading MA:

Addison Wesley. Keen, P.& Craigg, B. (1997). Online Profits: A Manager’s Guide to Electronic Commerce,

Boston: Harvard Business School Press. Laudon, K.C. & Laudon, J.P. (2010). Management Information System, New Jersey:

Pearson Education Inc. Norris, et al. (2000). E –Business and ERP: Transforming Enterprise, New York: John Wiley

and Sons. O’Brien, J.A. & Marakas, G.M. (2010). Enterprise Information System, New York: McGraw

Hill. Samuels, et al. (1990). Management of Company Finance, London: Chapman & Hall.