The Value of Internet for Small and Medium Enterprises in India

By Anup Varier, 25-Jun-2012

The most powerful advantage of the Internet for the SMEs is an improved level of customer interaction which is achieved by exploiting the participatory nature of today’s internet.

The Value of Internet for Small and Medium Enterprises in India
By encouraging businesses to turn to the Internet, countries can improve their competitiveness and growth prospects Paul Zwillenberg Partner, Boston Consulting Group

In multiple countries small and medium enterprises (SMEs) that have engaged actively with consumers on the Internet have experienced three-year sales growth rates up to 22 percentage points higher than those of companies with low or no Internet presence, according to the 'Internet Economy in the G-20' report by the Boston Consulting Group.

While SMEs constitute 17 percent of India's GDP they are responsible for 25 percent of private-sector employment. Almost all the high and medium web SMEs added jobs during the last three years but 17 percent of low- or no-web companies did not, says the report.Given that the SMEs have such a track record of job creation, policies that encourage more of these companies to develop an online presence could help address the lingering unemployment that currently plagues developing countries.

But the report finds that a surprising number of SMEs have not grasped the power of the Internet to build their businesses- or have ventured only to a very limited extent. Half of SMEs in India cited local business culture a significant barrier keeping SMEs from engaging more broadly or deeply online. While most of the hurdles need to be overcome by SMEs themselves, policy makers should take note that two in five SMEs cited access issues and government regulations as impediments to internet adoption.

33 percent of the people in India are willing to give up sex and 70 percent willing to give up alcohol for a year instead of the internet.

The most powerful advantage of the Internet for the SMEs is an improved level of customer interaction which is achieved by exploiting the participatory nature of today’s internet. Nearly two-thirds of High Web SMEs are moving quickly to match their customer’s engagement in social networks.

Social network penetration among internet users in India over 85 percent developing markets are going straight to social adopting social networking quickly as they come online. As per the three year historical sales growth figures in India, High web SMEs are seen to be growing 6 percent faster than their low or no-web counterparts.

The report also showed that all of the High Web SMEs in India intensely use the internet for setting up their website, online advertising, social networking and e-commerce and a majority also uses it for blogging, recruitment and paying their suppliers. “Around the world, SMEs that embrace the Internet are growing faster and adding more jobs than those that don’t. By encouraging businesses to turn to the Internet, countries can improve their competitiveness and growth prospects,” said Paul Zwillenberg, a BCG partner and coauthor of the report.

At a time when 33 percent of the people in India are willing to give up a sex and 70 percent willing to give up alcohol for a year instead of the internet, its impact is unquestionably clear. It is up to the SMEs to leverage this trend and rein in their profits.

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