Contemporary Business Environment: Key Challenges for UK SMEs

This essay identifies the key challenges faced by UK Small and Medium Enterprises (SMEs) that have significantly impacted their internal and external environments, particularly during the Covid-19 pandemic. It highlights issues such as resource scarcity, supply chain disruptions, lack of flexible working strategies, changing consumer behavior, and the need for technological innovation. The essay also examines the challenges SMEs face in interacting with the external environment, including access to finance, high competition, and strained supplier relationships. Furthermore, it analyzes the role and support provided by the UK government to SMEs during the Covid-19 period, including initiatives like Innovative Voucher Initiatives, Recovery Loan Scheme, Start Up Loans Company Scheme, Bounce Back Loan Scheme, and Enterprise Investment Scheme. The conclusion emphasizes the need for SMEs to adapt to these challenges to ensure their survival and growth in the contemporary business landscape. Desklib provides access to similar essays and study resources for students.

Contemporary Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
Books and Journals......................................................................................................................9

INTRODUCTION
Management of small and medium size enterprises during the pandemic period is quite
challenging for the owner as well as whole workforce. As per 2021 report, the total number of
SMEs in the UK is around 5.6 million which is usually 99% of the total businesses (Eze and
et.al., 2018). The purpose of this essay is to identify the key challenges faces by the UK SMEs
that have put huge impact on the internal environment of the SME organizations. Further, the
essay will also cover key challenges that impacted the UK SMEs strategies of interaction with
the external environment in the past two years or during Covid-19 pandemic. Lastly, it will also
be examined the role of the government of UK towards supporting the SMEs during the Covid-
19.
MAIN BODY
Key Challenges impacting internal environment of UK SMEs organizations:
Small and Medium Enterprises of UK has faced lack of resources availability is one of
the major challenges that put major negative impact over the internal environment of the
businesses. The SMEs of UK are unable to arrange resources during the time of Covid-19 from
its supplier because of the lock-down restriction. The suppliers of SMEs of UK provide the raw
material to its business through transportation and during the Covid-19 the accessibility of
transportation is quite poor. The impact of which small and medium organizations of UK unable
to get the raw material on time which leads to delay in production. This challenge also leads to
the inability of the SMEs to meet the demand of customers in the market. On this basis, it is
further identified that the lack of supply chain and transportation facility is also one of the key
challenge that has impacted the internal environment of small and medium size organizations of
UK. The non-availability of transportation facility has affected the medium size organizations
that manufacture perishable goods very hardly (Mallett, Wapshott and Vorley, 2019). It is
because they are unable to supply its perishable goods to the retailer or wholesaler on time the
impact of which their goods are spoil which leads to loss in term of food as well as sales.

It is further identified that lack of flexible working strategies is also one of the major
challenges that is faced by the UK SMEs in the last two year of Covid-19. It is because the
employee is working from the home due to government restriction. The employees are unable to
get flexibility while working from home which has demotivated them to work with full potential
and enthusiasm. Also, the cut in salary of the employee during past two years has also
discouraged the employee to work extra for the company. In this way, it can be said that the
SMEs of UK faces lack of employee morale due to lack of flexible working is has impacted their
internal environment (Sunday and Vera, 2018). For example, Eagle Eye Solution Ltd is a
medium size IT business of UK that has faces lack of employee engagement in the working
during the past two years of Covid-19 situation. The impact of which their sales are highly
declined and customer experiences are also affected as employee unable to provide high quality
services to its clients with low morale and lack of working flexibility.
The change's consumer behavior is the most significant challenge that is faced by UK
SMEs during the last two years. The small and medium size organizations of UK have viewed
that customer is started purchasing products more from the offline channels as compared to local
stores. The impact of which the sales as well as customer base of the organization has reduces to
large number in the past two years (Abed, 2020). For example, Pharmacy2U is a pharmaceutical
store in UK has seen huge decline in their sales during the Covid-19 period because people of
UK started purchasing medicines from the stores and supermarkets where online ordering is
available along with online delivery to doorstep.
Further, the lack of technological innovation and online marketing is also one of the
biggest challenge that is impacting the Small and medium organizations of UK. It is important
for all SMEs of UK that they should invest in the technological innovation as well as social
media marketing in order to attract the large customer base and provide its products to customers
through online delivery. The poor or nil social media marketing or online marketing of Verdant
Leisure of UK has impacted their reputation, sales, profitability as well as performance of
company. Verdant Leisure is one of the best picnic spot in UK where people can come and spend
quality time. But due to the lack of social media marketing of the business, they unable to make
its existence in the last two years (Amankwah-Amoah, Khan and Wood, 2021).

Key Challenges impacting UK SMEs strategies of interacting with the external environment:
In order to deal with the external environment factors such as social, the UK SMEs
usually adopt the strategies of investment in the marketing. The strategies of hiring marketing
experts and investing money in the different social media & online marketing tactics, the SMEs
of UK such as Pharmacy2U face challenge of lack of access to finance (Saka and Chan, 2020). It
means Banks of UK does not provide money or loan to SMEs of UK because of the high risk of
losing money. Also, if they provide any such loan then they charge higher rate of interest and ask
for too many security document. In this way, it can be said that lack of accessibility to money is
one of the major challenge faced by UK SMEs during Covid-19 in order to adopt strategies of
interacting with external environment.
Further, it is also analyzed that high level of competition is also one of the major
challenges that are impacting the UK SMEs strategies of interacting with the external
environment. It is because small and medium size organizations of UK face large number of
competition from the companies that provide the same products to the customer of UK through
online channels. The impact of which the strategies they are adopting such as lowering the prices
of their goods and services have not been able to view and utilize by the customers. In this sense
it can be said that the low-cost strategies adopted by SMEs for enhancing their sales has been
highly impacted because of the high competition challenge and non-presence of company over
the online platforms (Mallett, Wapshott and Vorley, 2019). Thus, it is also advised to the small
and medium-sized organizations that they should build strong launch their own website and
market their products on social media platform to attract large customer and reduce level of
competition.
The poor relation with the supplier and lack of money is also one of the key challenges
that impacting the UK SMEs strategies of interacting with the external environment. This means
that there are many small and medium size organizations of UK such as Eagle Eye Solution,
Verdant Leisure etc. who uses the raw material supplied by the supplier in order to produce the
final goods and provide the final services to the customers. But this strategy to deal with the
external environment of UK SMEs get failed in the last two years because the SMEs sales are
highly decline. The impact of which they do not have enough money to pay its supplier on time.
Also, the relation of company with its supplier is also poor that supplier refuses to pay the

company raw material on credit. This has leads to delay in production and further reduction in
sales.
Also, the UK SMEs in order to deal with the external environment of economic growth
adopted the expansion strategy at national level. For example, CafePod Coffee Co. is one of the
strong and effective coffee drink producer in UK. The owner has decided to expand its business
to other UK market as well in order to maintain its position and gain competitive advantage.
However, their strategies of expanding the business have highly get affected in the last two years
because of the Covid-19 and temporary closer of business (Calabrese, Cowling and Liu, 2022).
The business is unable to get return from new café store in term of sales and started bearing loss
due to higher investment in new store. In this way, it can be said that SMEs of UK faces lack of
customer accessibility and lock down restriction as a biggest challenge while interacting with the
external environment.
Examination of UK government support to SMEs during the Covid-19 period:
During the Covid-19 period, around 48% of the UK SMEs have faced liquidity problem
within their business. So, in order to deal with those issue, government of UK has provided
support to UK SMEs during the Covid-19. This support includes Innovative Voucher Initiatives.
This is a program stared by the government of UK in order to provide a grant of up to £5000 to
SMEs businesses who have worked with the supplier for the first time. This initiative is basically
run by Technology Strategy Board with the aim of encouraging the UK SMEs to move outside
their current network in order to grow and develop SMEs (Doruk, 2022).
Further, the Recovery Loan Scheme is also one of the financial support scheme launch by the
government of UK during the Coronavirus outbreak. This recovery loan scheme is basically
available to small and medium size business of UK so that they can recover from the loss or
liquidity issue they have faced during the period of Covid-19. Under this scheme, UK
government has provided access loan and financial support of up to £2 million per business. The
government of UK have guaranteed 70% of the finance to the lender but the borrower is always
liable for 100% for the debt under this scheme.

Another financial support provided by government to the small and medium size businesses
during the pandemic situation is Start Up Loans Company Scheme. The individual who have
great business idea and want to start business in UK along the business trading for less than 36
months can claim funds under this scheme. The government of UK will provide funds loan of up
to £25000 under this financial support scheme to SMEs. The condition for applying under this
scheme is that the individual should be 18-plus age, based in UK and have a UK residency. Till
now, the scheme has supported around 90000 business of UK with more than loan amount of
£800 million.
The Bounce Back Loan Scheme (BBLS) is also one of the financial support provided by the
government of UK to enable smaller businesses to access finance more quickly from the banks
during the coronavirus outbreak. This is a scheme launched in order to support small and
medium-sized businesses to acquire loan between £2000 to up to 25% of the business turnover. It
means under this scheme the maximum loan available to small business is £50000 (Park and
Chung, 2021). The businesses can borrow under this scheme until they borrow total limit of
£50000. Basically, in this scheme, the government give guarantee to the lender on behalf of
borrower or SMEs of UK.
The other and most effective support of UK government includes Enterprise Investment
Scheme. Under this scheme, the small and medium sized businesses of UK can enable the
businesses can raise the amount up to £5 million each year for the purpose of investment. The
maximum limit of this scheme throughout the business life is £15 million. This helps the
company to raise money for their growth.
CONCLUSION
After summing the above information, it has been analyzed that the SMEs of UK has faced
various key challenges during the last two years of Covid-19 period. In this period, they have
face challenge of lack of resources, lack of working flexibility, poor online marketing etc. that
impacted the internal environment of the SMEs of UK. Further, it is also summarized that UK
SMEs have also faced key challenges such as high competition level, lockdown restriction,

changing customer behavior while interacting with the external environment. Lastly, the various
governmental support provided by UK government has been identified and described properly.

REFERENCES
Books and Journals
Abed, S. S., 2020. Social commerce adoption using TOE framework: An empirical investigation
of Saudi Arabian SMEs. International Journal of Information Management. 53. p.102118.
Amankwah-Amoah, J., Khan, Z. and Wood, G., 2021. COVID-19 and business failures: The
paradoxes of experience, scale, and scope for theory and practice. European Management
Journal. 39(2). pp.179-184.
Calabrese, R., Cowling, M. and Liu, W., 2022. Understanding the dynamics of UK Covid‐19
SME financing. British Journal of Management. 33(2). pp.657-677.
Doruk, Ö. T., 2022. Covid-19, Fiscal Policies, and Small-and-Medium-Sized Firm Survival:
Evidence From the Cross-Country Matching Analysis. Evaluation Review,
p.0193841X221100361.
Eze, S. C. and et.al., 2018. Key success factors influencing SME managers’ information
behaviour on emerging ICT (EICT) adoption decision-making in UK SMEs. The Bottom
Line.
Mallett, O., Wapshott, R. and Vorley, T., 2019. How do regulations affect SMEs? A review of
the qualitative evidence and a research agenda. International Journal of Management
Reviews. 21(3). pp.294-316.
Mallett, O., Wapshott, R. and Vorley, T., 2019. How do regulations affect SMEs? A review of
the qualitative evidence and a research agenda. International Journal of Management
Reviews. 21(3). pp.294-316.
Park, J. and Chung, E., 2021. Learning from past pandemic governance: Early response and
Public-Private Partnerships in testing of COVID-19 in South Korea. World
Development. 137. p.105198.
Saka, A. B. and Chan, D. W., 2020. Profound barriers to building information modelling (BIM)
adoption in construction small and medium-sized enterprises (SMEs): An interpretive
structural modelling approach. Construction Innovation.

Sunday, C. E. and Vera, C. C. E., 2018. Examining information and communication technology
(ICT) adoption in SMEs: A dynamic capabilities approach. Journal of Enterprise
Information Management.