Small & Medium Enterprises (SME’s) constitutes for over 75% of the number of enterprises in Sri Lanka and contribute to 52% of the GDP of Sri Lankan economy. In any case, the development and extension of SME’s are constrained due to a multitude of factors that are yet to be investigated. Competition is often intense for SME’s in Sri Lanka and they can neither influence price nor quantity. The standard view of competitive advantages on differentiation or cost is a challenge for SME’s. They are probably not going to have the option to “lock” in clients and providers, build entry barriers or altogether lower cost. SME’s usually have limited resources in finance, skilled employees, in-house knowledge or management. Meanwhile, digital transformation is featured in many businesses enabling reshaping the strategy and business models. SMEs are also found as empirically investigated context with the concept of digitalization, but still further studies are claimed on it. Accordingly, this paper investigates how SMEs could be benefitted with digital transformation as a strategic initiation whilst challenges and cases are discussed in line within. It has followed comprehensive literature review as the main research tool and the paper is framed as a concept paper with the discussion on empirical insights. Authors made an attention on Sri Lankan SME sector as a specific context. Finally, it concludes the paper with some research directions and priorities for the future studies.
Keywords: Digital Transformation, SMEs, Sri Lanka, business models, competitive advantages