The Role of Digitalization in Supporting SMEs During the COVID-19 Pandemic

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The Role of Digitalization in Supporting SMEs During the COVID-19 Pandemic

Prompt 01

During the COVID-19 pandemic, SMEs and retailers faced various challenges. Notably, organizations play a crucial role in supporting the countrys economy and the needs of its customers. Thus, during the pandemic, providing services and attracting new leads has become more difficult than usual. The dissertation topic revolves around the organizational culture of retail businesses, the retail industry, and their responses/implications to the COVID-19 pandemic. The author demonstrated three arguments supported by empirical studies to analyze the background and formulate the problem space.

Argument 1. COVID-19 Pandemic Has Heavily Impacted Customer Behavior Patterns

Buying behavior began to deform; for instance, consumers began to buy large quantities of products to build up stocks. Because of this, retailers worldwide face shortages of certain goods and the unavailability of brands (Pantano et al., 2020). Also, customers price sensitivity has changed, with many consumers adequately accepting price increases of up to 300% for certain product categories during the emergency period (Pantano et al., 2020, p. 210). The introduction of new restrictions, for example, on social distance, has led to increased online shopping. Interestingly, Pantano et al. (2020) stated that some target groups have entirely changed their preferred shopping channel. For instance, older shoppers are getting better at digital technology and making more online purchases. Unusual shopper behavior forces retailers to quickly adapt to emergency changes to avoid losing competitiveness (Pantano et al., 2020). The growing competition from online stores and the fear of losing profits is negatively affecting the retailers business and forcing some to close some physical stores, which, as a result, changes the previous behavioral habits of buyers.

Argument 2. Retailers Should Abandon Traditional Organization Structure and Change Their Value Proposition Strategies to Survive

The pandemics forced companies to change their customer approach and value proposition strategies. Pantano et al. (2020) state that retailers should focus on four core areas to maintain consumer loyalty and gain a competitive advantage. These areas include rethinking agile retailing, a new role for retailers in society, putting consumers at the core, and digital communication Pantano et al., 2020, p. 211-212). The authors suggest that agile methodology will provide retailers with new opportunities and quick adaptation to organizational changes and the abandonment of traditional plans. Also, in emergencies, the retailer needs to become an essential part of society in order to increase customer loyalty and trust. Good practices include manufacturing medical equipment, brand-name disinfectants, and donations and charities. Nevertheless, the increase in digital commerce should encourage retailers to improve digital communication; customers and their interests should be the main component of the business.

Argument 3. Small and Medium Enterprises Are Sensitive to Crisis and Require Financial Support

COVID-19 negatively impacted small and medium businesses and proved that they are sensitive to difficult situations. A survey conducted by Bartik et al. (2020) using a survey of 5,800 US businesses supports the argument. The results show that many SMEs, exceptionally 43% of businesses had temporarily closed, and nearly all of these closures were due to COVID-19 (Bartik et al., 2020, p. 1). Also, the pandemic has affected the massive staff reduction in companies. According to the survey, overall employment declined significantly, totaling a 39% reduction from January headcount (Bartik et al., 2020, p. 6). In addition, the duration of the pandemic has affected the companies, so it can be concluded that companies are sensitive to the crisis. A prolonged possible continuation of the pandemic will harm the economy and especially the networks of enterprises. The survey results illustrate that some companies have had to cut costs, take out loans, or close their businesses altogether (Bartik et al., 2020). In this case, Bartik et al. (2020) suggest solutions such as well-thought-out and sustainable economic policies and the opportunity for enterprises to obtain financing that can immediately improve the situation. The authors also cite financial figures, namely that 72 percent of small businesses in the United States have expressed their desire for CARES PPP loans, and the total volume of loans would be approximately $410 billion (Bartik et al., 2020, p. 11). Thus, the findings prove that SMEs need financial aid to cope with the pandemics consequences.

Small and medium-sized enterprises are core components of the economy. The global pandemic has shown that small and medium enterprises cannot maintain their small capital in emergencies and need funding to survive (Syed et al., 2020). Thus, Syed et al. (2020) analyze the impact of the pandemic and how to help companies in the Muslim world.

For example, Zakat can be a financial instrument to help SMEs. Syed et al. (2020, p. 354) argue that all the Muslims who are eligible to pay must pay a minimum 2.5% of their wealth every year to the poor. Therefore, Zakat, namely Islamic finance, can be given to small and medium enterprises for business development and positively impact the countrys economy. Besides, Qardh Al-Hasan is the non-interest or benevolent loan or non-margin loan that can also be used as a financial instrument in Islamic countries (Syed et al., 2020, p. 355). Qardh Al-Hasan is a loan provided by the first party to the second installment without waiting for a reward. Consequently, The authors argue that Qardh Al-Hasan is still relevant today and, if applied correctly, can help the SME sector fight this COVID-19 pandemic.

Moreover, digitalization, namely the creation of a digital platform, may assist in obtaining fundings. Syed et al. (2020) argue that platform development on which users will be able to pay Zakat and Qardh Al-Hasan will support companies with funding. The platform will use machine learning, natural language process (NLP) and digital image processing techniques to analyze the information provided by a borrower or Zakat recipient (Syed et al., 2020, p. 358). Therefore, digitalization is a powerful tool in SMEs funding search.

Prompt 02

The proposed study investigates the SMEs organization structure, innovations introduction, and implications in the retail industry to the COVID-19 pandemic. Therefore, the research topic is digitalization as a financial tool to assist SMEs organizational culture and implications for COVID-19 pandemics. The problem statement is to address how digitalization may assist SMEs in analyzing customers behavior patterns, abandon traditional organization structure, change the value proposition, and enhance financial support search during COVID-19.

To highlight the seriousness of the issue, SMEs are crucial to economic development, and their financial losses due to pandemics may impact the countrys welfare significantly. The problem includes analyzing retail SMEs organizational structure, innovative policies, and financial support requirements. According to Pantano (2020, p. 210), less digitally-savvy consumers have started discovering and enjoying online shopping. Consequently, digital communication is one of the core aspects that SMEs should consider to maintain business growth and satisfy customers needs.

Digitalization and agile methods are necessary to respond to the negative consequences of COVID-19. Accordingly, they will help to reduce response times and simplify processes,; therefore, facilitate dealing with customers demands (Pantano et al., 2020, p. 211). In addition, digitalization, namely platforms development, may help SMEs in obtaining financial funding. Moreover, based on the survey, over 70% of respondents anticipated taking advantage of aid (Bartik et al., 2020, p.1). According to Bartik et al. (2020, p. 1), many small businesses are financially fragile, and they require loans in emergency situations. Therefore, the author aims at investigating how digitalization may assist SMEs in discovering customers behavioral patterns and overcoming difficulties arisen from COVID-19.

References

Bartik, A. W., Bertrand, M., Cullen, Z., Glaeser, E. L., Luca, M., & Stanton, C. (2020). The impact of COVID-19 on small business outcomes and expectations. Proceedings of the National Academy of Science, 117(30), 1-11.

Pantano, E., Pizzi, G., Scarpi, D., & Dennis, C. (2020). Competing during a pandemic? Retailers ups and downs during the COVID-19 outbreak. Journal of Business Research, 116, 209-213.

Syed, M. H., Khan, S., Raza Rabbani, M., & Thalassinos, Y. E. (2020). An artificial intelligence and NLP based Islamic FinTech model combining Zakat and Qardh-Al-Hasan for countering the adverse impact of COVID 19 on SMEs and individuals. International Journal of Economics and Business Administration, 8(3), 351-364.

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