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Paper number: 2355431
ATTAIIG COMPETITIVE ADVATAGE THROUGH EFFECTIVESUPPLY CHAI MAAGEMET OF SME
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oraini Ismail and Rosmimah Mohd Roslin
 Faculty of Business Management, Universiti Teknologi MARA, Shah Alam, MALAYSIA E-mail address of corresponding author:rosmimah@salam.uitm.edu.my 
ABSTRACT
The interorganizational approach where relational elements are incorporated in the analysis of SupplyChain Management (SCM) of Small Medium Enterprises (SMEs) is adopted in this study. This is inline with the study’s main intention of assessing the determinants or drivers for effective SCM of small businesses and their impact on the attainment of competitive advantage. The findings suggest aninteresting perspective on SCM and distribution channel functions among SMEs where elements of information sharing, cooperation and integration are linked to competitive advantage. The correlationamongst the three independent variables of cooperation, information sharing and integration withcompetitive advantage are all significant, depicting the relevancy for SMEs to focus on these relationalelements. The highest correlation is noted between information sharing and integration and thisdefinitely makes sense as SMEs strive to integrate their functions that are moving towards theattainment of common goals. Thus, the more integrated the functions amongst supply chain anddistribution partners, the more likely that information would be shared amongst them. However, it isinteresting to note that the predictive ability of the relational elements of cooperation, informationsharing and integration on competitive advantage is not supported through the regression analysis. Inother words, the existence of cooperation, information sharing and integration amongst supply chainand distribution channel members do not necessarily predict that competitive advantage will beattained. There are perhaps other factors that
 
should be considered besides relational elements thatinfluence competitive advantage.Keywords: Supply Chain Management (SCM), SME, inter-organizational, relational elements, competitiveadvantage
1. ITRODUCTIO 
The term supply chain management (SCM), has often been linked to both marketing andoperations management. SCM forms part of management decision that integrates both marketingand operational requirements and in recent years has been given more emphasis as the integration becomes more complex and critical for the survival of firms. Decision making pertaining to SCMis often viewed from three levels; strategic, tactical and operational and together they relay theimportance of SCM towards effective management. From a strategic perspective, Hamel (1991)and Porter (1985) note that competitive strategies undertaken by businesses through efforts suchas SCM have a positive impact on the performance and survival of the firms. As such, it becomes pertinent that efforts geared toward SCM enhancement become an element of utmost priority for  business firms to survive, regardless of the sizes of such firms. Such an understanding shouldalso include the Small Medium Enterprises (SMEs) that make up 89.3% of companies in themanufacturing sector in Malaysia and therefore is a main source of job avenues in the country(SMI Business Directory, 2003).
 
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Paper number: 2355431
The Small Medium Industries (SMIs) is one sector where firms of small and medium sizesstrived to survive and sustain in this dynamic competitive business environment. Technicalexpertise to create brand name recognition and reputation (product differentiation), marketingexpertise to formulate unique and diverse advertising campaigns for constructing a recognizedimage (marketing differentiation) and efficiency along the activities of the business to establish alow price presence (low cost) focusing on a geographic corner of the consumer market are thestrategies that can create distinct patterns of competition for micro-business owners (Tehrani &White, 2003). Indeed, the influence of small enterprises on Malaysia’s industrial competitivenessand economic competitiveness is very much profound. They provide diverse jobs for thecommunity, provide the means for a family residing in a community to fend for themselves, andalso attract skills and investments to the community to create long-term stability. However, manysmall enterprises are notoriously slow to invest in new technologies and to adopt best practices.This study therefore attempts to assess the extent of competitive advantage that SMEs are capableof attaining through SCM initiatives and channel relationship dynamics that SMEs establish inthe supply chain and distribution channel.The study aims:
 
1.
 
To investigate the supply chain activities of small and medium enterprises (SMEs)2.
 
To examine the relationships between information sharing, cooperation and integration of channel members amongst the SMEs for the attainment of competitive advantage,3.
 
To examine which SCM’s relational factors have major impacts on competitiveadvantage,4.
 
To determine whether technology adoption moderates the relationships betweeninformation sharing, cooperation and integration and competitive advantage attained bythe SMES.
1.1 Research Framework 
The study adopts the relational perspectives of SCM and therefore focuses on elements of cooperation, information sharing and integration of activities as the independent variables. Suchrelational elements are linked to the realization of the competitive advantage as measured byconstructs relating to SCM activities. In addition, technology which is often postulated as acritical component in SCM and distribution function is used as a moderating variable between theindependent variables and competitive advantage. The use of technology as a moderator is pertinent in assessing the extent of efficiency amongst SMEs in the SCM. The researchframework is therefore depicted as follows:
Figure 1: Research Framework 
CooperationInformation sharingIntegrationCompetitive advantageTechnology Adoption
 
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14 - 15 March 2009
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Paper number: 2355431
2. LITERATURE REVIEW 
The importance of the Small-to-Medium sized Enterprises (SMEs) to the national economy had been repeatedly emphasis and its contribution in terms of income generation and labour employed has indeed a profound impact on the wealth of a country. Yet, the successfuldevelopment of SMEs and the way they should be managed have gone largely unnoticed in theacademic literature due to the heterogeneity of SMEs. The SME sector is not homogenous andmanagement is therefore, contextually specific and dependent on a variety of factors (Goss &Jones, 1997; Hannon, 1999). As such, efforts on enhancing SME’s capabilities are often lackingin concrete conceptualization of constructs that could be transformed into tactical inputs.There are many internal and external factors that can hinder formation and sustainability of SMEs. Small size of customer base, lack of education and business acumen, deficient knowledgeof government policies and regulations, inadequate technical skills, and lack of financialresources are among factors that inhibit the growth, stability and performance of smallenterprises. Identification of the factors that can assist small enterprises to adopt and successfullyimplement distinct patterns of competitive strategies is crucial in stabilizing the future prospectsof these businesses. Several studies (Miller & Grace, 1990; Miller & Levin, 1993; Littunen, 2000and Tehrani & White, 2003) have examined primary factors and conditions that enhance potentialcapabilities and economic survival of small businesses. In addition, the restructuring,rationalization and move towards closer collaboration with suppliers through more effectivesupply chain management are changing the context of business relationships in supply chain(Fox, 1998).Collaboration and cooperation are viewed synonymously and these form relational elementsin SCM and marketing channels (Dwyer, Schurr, & Oh, 1987; Morgan & Hunt, 1994). Relationalelements therefore, are often seen as offering many advantages such as enhanced efficiency,increasing channel member motivation, channel satisfaction and growth implications (Hausman,2001). In addition, members in relational exchanges cooperate to enhance effectiveness and productivity as indicated by Frazier, Spekman & O’Neal (1988). Therefore, this study adopts therelational elements in SCM to address implications on competitive advantage.SMEs operating in a supply chain are
 
open to the peculiarities of interorganisational elementsas firms with the supply chain are diverse and functionally different from one another. Businessrelationships between firms operating within the supply chain are dictated by relational elementswith an orientation towards ongoing and long term relationships. Ellinger, Ellinger and Keller (2002) propose the attractiveness of long term relationships in distribution channel as channelmembers strive to enhance channel efficiency. In line with this, Macpherson and Wilson (2003)stress the need for SMEs to consider relational business competencies possible throughcollaborative business relationships in a supply chain.At the supply end, the supply chain is depicting the essentials of collaboration as firms withinthe chain strive for efficient SCM. Webster (2008) notes that long term and close relationshipwith a buyer in a supply chain is generally positive, though it must be balanced againstinvestments to ensure sustainability. Partnerships between members in the supply chain are becoming more common as collaborative efforts become more pronounced. Such partnershiporientation is typical of collaborative or long term strategies (Black & Peeples, 2005). Mostorganizations with this long term perspective forge long term partnerships and therefore create amarketing and operation system that meets the needs of all the parties.Such long term partnerships dictate the need for sharing information and the integration of key supply chain and distribution activities (Mohr & Nevin, 1990). Supply chain and distribution partners are more likely to commit to long term relationships when the expectation of the
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