E-commerce in Small Medium Enterprises (SMEs)
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Analysis of innovation of e-commerce in small and medium-sized enterprises
In the last decade large organisations have realised the increasing impact of new and cutting edge technology. Clark (1989) emphasized on the importance of technology to gain competitive advantage but at the same time he warned that building and maintaining such advantage will always be a challenge.
Information technology in the form of internet has allowed organisations and their management to benefit from better quality information and better decision making. White (1997) adds that the internet is extremely effective in attracting computer literate people. Especially Internet has made a prolific influence on the business world. The internet has become an area where consumers are able to find what they need (Amor, 2002).
This is clearly evident by the growth of internet in the last few years as shown in figure 1. Being involved with the new technologies brought many opportunities and easiness to reach products to consumers anywhere, anytime in the world (McKenna,2002). The new technological innovations have allowed organisations to conduct business in a completely new way by using online electronic transaction mechanisms and the concept of E-Commerce evolved(Gunasegaram & Love, 1999; Westland and Clark, 1999). Today in most of the business and commerce sector IT has taken the form of E-Commerce.
Figure 1 Growth of internet
E-commerce is a major innovation, which has benefited industries across the globe even the Small and Medium Industries. The SME’s in Itself amount to a large part of the economy, at the moment there are12000 SME’s using EDI, electronic data interchange to further their businesses. Although the SME’s are contributors to the national economy of any country, the whole framework used to build them lacks transparency.
There are problems around the financial resources available to keep them going; there is not enough legislative and administrative support from the government. On the business front these enterprises lack the right kind of management vigour, style, knowledge, and experience in handling more developed innovative technologies, which are inundating the markets.
This is something they need to be aware of in order to survive the competitive environment. The SME’sdon’t have a single development system, which can safeguard theirinterests. They need an integrated approach, which encompasses threelevels, strategic, institutional, and enterprise. The government andthe public/private sector need to offer support for the fulfilment ofthis long-term strategy, which will make SME’s into profit centres’-commerce brings in a host of advantages as well as disadvantages tome’s and this project is an attempt to learn more and develop deeper understanding into the effect of technical innovations in e-commerce on Small and medium sized enterprises [Kyiv, 1997].
This study attempts to add to the existing literature by looking at hawse’s are approaching to incorporate e-commerce into their business strategy or how they are trying to improve their existing approach. This study will also evaluate consumer experiences of online shopping and how e-commerce has impacted on their expectations and goes on to suggest how online stores may need to improve if they are to meet these new expectations.
2. Aims and Objectives
The main aim of this project is to explore how the SME’s are important to the national economies and how the use of e-commerce help them gain a better position in terms of growth and profitability. There search context is based on SME’s in England to get an even background to this research question. As one knows technology and innovation always have repercussions, this project would also explore how theses ME’s deal with the disadvantages and convert them into viable benefits.
This project will also find out to what extent do small firms use-commerce in their business processes and what are the barriers to the adoption of e-commerce? Customers as well as organization’s perspective towards e-commerce will be found out. Alongside the study will also try to find out how much electronic transaction have influenced the small-scale industry? Additionally this dissertation will also provide with accurate, up-to-date, research-based information about possible future trends in e-commerce.
And lastly, this research will provide some suggestions and recommendations to be considered for the improvement of-commerce for small firms to develop ideas for further research in this context. This study on SME’s under different situations and circumstances would help present an overall portrayal and even help understand the issues under a magnifying glass when faced in certain sectors like manufacturing.
To summarize some of the questions that will be addressed through this research are as follows:
• What is the status of SME’s in today’s global business environment?
• What is the contribution of the SME’s in the national and global economies?
• How will innovations like the Internet in e-commerce help the businesses in SME’s grow and become more profitable ventures?
• What are the problems/mistakes in the E-business strategy adopted in general by small firms in U.K?
• What are the problems faced by customers and organisations while dealing on internet?
• What are the factors that influence the development of e-commerce?
• Does e-commerce open up new markets for small scale industries in the United Kingdom?
1. Critically evaluate the relevant literature on small firms and the importance/usage of the internet.
2. Understand small firms’ problems and barriers to the use of e-commerce through articles, newspapers, interviews and surveys.
3. Gain specific knowledge of internet usage for small firms in business through interviews, publications and company information.
4. Provide recommendations to improve the usage of internet as a competitive tool.
5. The advent of the e-commerce, its advantages and disadvantages.
3. Literature Review
E-commerce may be defined as “The sharing of business information, maintaining business relationships, and conducting business transactions by means of Internet-based technology” (Riggins &Rhee, 1998, p. 90). Alternately it may also be defined as “Anything that enhances your relationships with an existing customer and increases the revenue you get from the customer.” (Sullivan, 1998, p.24).
The Internet and Electronic Commerce have made the world market smaller place to trade in. The Internet has opened up many possibilities of organising and running an online business. It has created a universal platform for buying and selling of goods which has resulted in faster transaction times and reduced transaction costs. Colin Turner (2000), in his book on the information of e-economy, talks about the e-commerce business accomplishment and strategies.
E-commerce has its benefits and shortcomings, along with this belief; the companies are also battling with the pressures of information technology revolution coming to an end. “Despite all the hype surrounding electronic commerce, and the recent failure of many of that com companies, it does present real opportunities to small entrepreneurs in many countries.” (Fatal and Janet, 2004)
Classification of E-commerce
According to the applications or the nature of transaction of E-commerce, it can be categorized as follows:
Turban et al (2000) divided E-commerce into three categories in terms of its applications:
a) Electronic markets:
It refers to buying and selling goods and services at an electronic marketplace, where the business centre is not a physical building but rather a network-based location. The market handles all the necessary transaction, including response to information request, purchase acknowledgement, shipping notice, purchase/service delivery, payment acknowledgement, and the transfer of money between banks and so on. In electronic market, the principal participants - transaction handlers, buyers, brokers, and sellers, are not only at different locations but seldom even know one another. The means of interconnection varies among parties and can change from event to event, even between the same parties.
b) Inter-organisational systems:
They are facilitating inter and intra-organization flow of information, communication and collaboration. An IOS (inter-organisational information systems) involves information flow among two or more organisations. Its major objective is efficient information and transaction processing. All relationships are predetermined and there is no negotiation, just execution. A typical IOS includes a company and its suppliers and/or customers. Through it, buyers and sellers arrange routine business transactions and information is exchanged over communications networks using prearranged formats. Its main types aired (Electronic data interchange), extranets, electronic funds transfer, electronic forms, integrated messaging, shared databases and supply chain management.
c) Customer service:
It is a series of activities designed to enhance the level of customer satisfaction, helping customers to resolve problems they encountered in any phase of the purchasing process. E-commerce plays a dual role in customer service. First, it provides customer service to a process that is done completely offline. Second, it provides help to online transactions. Types of customer service include answering customer inquiries, providing search and comparison capabilities, providing technical information to customers, allowing customers to track order status, and allowing customers to place an online order and so on.
Kalakos & Whinstone (1997) contended that there are three distinct general classes of electronic commerce applications:
a) Inter-organizational Electronic Commerce:
Like Turban et al above, Kalakos & Whinstone consider that-commerce can be applied in following inter-organizational business:
Supplier management: Electronic applications help companies reduce the number of suppliers and facilitate business partnerships by reducing purchase order (PO) processing costs and cycle times, and by increasing the number of Pops processed with fewer people.
Inventory management: It shortens the order-ship-bill cycle and time of transmitting information. Businesses can also track their documents to ensure that they were received, thereby improving auditing capabilities. This also helps reduce inventory levels, improve inventory turns and eliminate out-of-stock occurrences.
Distribution management: Electronic application facilitate the transmission of shipping documents such as bills of lading, purchase orders, advanced ship notices, and manifest claims, and enable better resource management by ensuring that the documents themselves contain more accurate data.
Channel management: Electronic application quickly disseminates information about changing operational conditions to trading partners. By electronically linking production-related information with international distributor and reseller networks, companies can eliminate thousands of labour hours and ensure accurate information sharing.
Payment management: Linking companies with suppliers and distributors enables payment to be sent and received electronically. Electronic payment reduces clerical error, increases the speed at which companies compute invoices, and lowers transaction fees and costs.
b) Intra-organizational commerce
The purpose of intra-organizational applications is to help a company maintain the relationships that are critical to delivering superior customer value. Its applications are as follows:
Workgroup communications: It enables managers to communicate with employees using electronic mail, videoconferencing, and bulletin board, hence increase the dissemination of information, resulting in better-informed employees.
Electronic publishing: It enables companies to organize, publish and disseminate human resources manuals, product specifications and meeting minutes using tools such as the World Wide Web. Meanwhile, it reduces costs for printing and distributing documentation, faster delivery of information and reduction of outdate information.
Sales force productivity: These applications improve the flow of information between the production and sales forces, and between the firms and customers. The goal is to allow firms to collect market intelligence quickly and to analyse if more thoroughly.
c) Consumer-to-Business Electronic Commerce
Social interaction: Consumers can communicate with each other through e-mail, videoconferencing, and news group etc.
Personal finance management: Electronic applications enable consumers to manage investments and personal finances using online banking tools.
Purchasing products and information: Consumers can find online information about existing and new products/services.
Turban et al (2000) further goes on to describe E-Commerce based on the types of transactions and are more popularly known as:
B2B (Business-to-Business): Most of E-commerce today is of this type. It includes the IOS transactions and electronic market transactions between organisations.
B2C (Business-to-Consumer): These are retailing transactions with individual shoppers.
C2C (Consumer-to-Consumer): In this category, consumers sell directly to consumers.
C2B (Consumer-to-Business): In this category, consumers sell directly to organisations.
Challenges to E-Commerce
Although the Internet offers great deals of advantages to electronic commerce and businesses, it also provides a number of challenges. Some of these challenges as mentioned by Turban et al (2000) are discussed below:
1. Unsuccessful Business Models
Not all companies that implement electronic commerce make benefits. Technologies changes so rapidly that keeping pace with change ultimately becomes too expensive or results in a failure.
2. Channel Conflicts
Sometimes a company uses more than one distribution channel (Online as well as traditional channels) to sell its products and services. This can cause conflict between the dealers as it becomes important in such case to maintain a balance between the different channels. For e.g.it might be possible that a particular company tries to sell its product online at a lesser cost with some discount and maintains the original cost while selling it offline. This disparity can cause its dealers to create a problem.
3. Legal Issues
Internet Laws are confusing and mostly non-existent. Also the Internet’s global and is used by individuals from different countries and thus it becomes difficult to decide which law to apply if a conflict arises.
4. Security & Privacy
This is the most important issue concerned with online transactions and businesses. Important information and valuable data like credit/debit card details, personal information, business plans and other company data can be easily leaked and tracked by hackers. Security risk in electronic payments has been one of the major reasons in making online businesses not to grow rapidly over the Internet.
Small and Medium Enterprise (SME)
Different countries define small medium enterprises in different ways. Teethe and Burn (2001) define small medium enterprises (SME) as “firms with less than 500 employees". This is further broken down into micro companies, those with less than 5 employees; small companies, those with 5 to 20 employees and medium companies, those with between20 and 500 employees". On the other hand, the UK Department of Trade and Industry (DTI, 1999) define SME’s as firms with 250 employees or fewer.
The European Commission (2003) defines SME’s as follows: "microenterprises are enterprises with a maximum number of 10 employees, maximum turnover of 2 million euros and a maximum balance sheet of total of 2 million euros. While small enterprises are enterprises with maximum number of 50 employees, a maximum turnover of 10 million euros and a maximum balance sheet of a total of 10 million euros. Finally medium enterprises are enterprises with a maximum number of 250employees, a maximum turnover of 50 million euros and a maximum balance sheet of a total of 43 million euros".
Figure 2 SME Thresholds (European Commission, 2003)
Buncombe (1999) points out that a number of studies have attempted to collect information on the make-up of Botswana's SME sector, by gaining access to official statistics and by conducting field surveys in connection with various research projects. According to the report, he defines enterprises according to the number of employees, annual turnover, and level of formality.
There is no real universally standard definition for Small firms. In a study carried by the ILO, more than 50definitions were identified in 75 different countries, with considerable ambiguity in the terminology used. For the purpose of this study the author will go with the definition of Small firms which defines Small firms as firms with 49 or fewer employees. From the foregoing definition of small medium enterprises (SME’s) by different researchers, it can be seen that the number of employees and turnover are the determinant factors in the definition of SME, but, the criteria is different from country to country.
SME’s and E-Commerce
Internet became a main way for effective marketing in business. It is one of the most effective media all over the world and this makes it compulsory channel to use for market entries. Specifically, small firms have major problems with strong companies and existing small firms about market entries in the market. They have to prove their identity in the market as an enterprise despite all these rivalry and difficulties such as web design, domain name, site security responsibilities to customers, etc.
They have to let customers know that they are in the market and internet is an efficient way to do so. Furthermore, cost advantages which come with e-commerce are reasonable for market entry. Small firms have a lot of to do as they are new tithe market or they need to grow in the market. They try to cut costs and increase investments in their business.
Internet provides great opportunity to small firms for their activities in the market. Even as they serve a local or regional market rather than a national or an international market, it might be difficult to enter market or to reach customers. E-commerce appears as the most efficient way to gain successor small firms in existing fierce rivalry.
The small firms generally provide the majority of the jobs and are significant contributor towards the national economy (Baldwin, 2001).Small and medium scale enterprises are considered to be the core out’s economy. According to Smith et al (2000) 99% of UK business firms can be categorized as small businesses and they employ up to 58% out’s total workforce. Hence small firms are extremely important in UK’s economy and the government expends considerable resources to support this sector. The UK government admits that small firms are neglected and left behind while the larger companies getting advantage over small businesses in the e-commerce world (Simpson; Docherty, 2004)
Thus it’s very important to study the problems and barriers encountered in adopting a new economy cycle by the sector which represents the majority of the countries businesses. Sadowski et al (2002) notes that even after the widespread use of internet technologies in the corporate world, the amount of Internet use varies to a great extent in the small-scale sector. The adoption of any new technology in this sector is influenced by the several variables as stated by Martens et al (2001).
These factors may include the characteristic of the firm, its competitiveness, the influence it has on third parties in the decision process, the management strategy and the characteristic of the new technology itself. All these factors lead company to strategic advantage if they used as they should be. It is important that the company sustains strategic advantage from e-commerce. Competitive business environment makes this matter more important (Hiding, 1999).As long as the company provides well designed web-site that suits with business and its requirements, then strategic advantage can be sustained.
Thomas H. Davenport (1993), in his book, ‘Process Innovation –Reengineering work through information technology talks about, how revolutionary approach to information technology and its integration in our business processes can change the scenario. This can dramatically change the way business is conducted in small and medium enterprises also improve the performance keeping in view the competitive environment. New technologies and process innovation brings a new commitment and strategic evolution to these enterprises.
Resources like information technology and e-commerce are largely untapped by the SME’s but once that scenario changes, there will be a lot of improvisations and growth avenues. Mandel (2001) says that every technological innovation and discovery finally has it downturn. When these new opportunities like e-commerce come into play, all businesses want ashore of this market. In their rush to get more profits, the investments are so heavy and lacking direction that invariably it leads to a loss since the economy infrastructure cannot support it.
This has been proven with the dotcom burst and doom. According to some authors, these SME’s can actually use the innovation of e-commerce to march forward and become integral contributors to the economies. Due to their sizes they lack the initiative and financial power to go all out and compete in different markets, e-commerce could be the solution to some of the marketing gaps, which hold them back from becoming more successful.
Importance of SME’s to countries’ economies
Baraka (2001) reports that growing evidence indicates that Small Medium Enterprises play an important role in promoting the national economic development of any country. They create a lot of new jobs and produce much of the creativity and innovation that fuels economic progress. Ninety present of the total number of companies in most countries is comprised of small medium enterprises, which provide on average 70% of job opportunities (OECD, 1997). 26% of OECD exports and35% of Asia's export are directly produced by small medium firms as suggested by Tendon (2002).
The existing literature from research in different studies points out that Small medium enterprises (SME) world-wide have found that Internet use has become a critically important aspect of their business. Porter(2001) supports this view and suggests that companies of all sizes should have a strategy of reacting to competitors and increased adoption of the Internet technology, which will lead to increase in competition within markets.
He further points out that "e-commerce reduces the difference among competitors' offerings and frequently migrate competition to price rather than products features or brand perceptions". He also suggests that smaller businesses could improve their business competitiveness with either other small businesses or larger companies by adopting e-commerce. Porter (2001) is backed up by an earlier study (Jacobs and Rowland 2000).
They suggest that "smaller businesses have, in particular, been encouraged to adopt e-commerce as a means of improving their competitiveness, either with other small medium enterprises or with larger companies, where they have been promised that e-commerce can level the playing".
According to Daniel and Wilson (2002), small and medium-sized enterprises are now increasingly making use of e-commerce. Daniel further suggests that “responding to competitive pressure was the main reason leading to companies to adopt e-commerce. Information sharing and communication between employees within the firm were found to bethe e-commerce activities where firms are realizing the greatest benefits". Hence, though the future of e-commerce is still unpredictable, it is important that developing countries, their governments and businesses should prepare for these new developments.
Benefits of e-commerce to SME’s
A growing number of organisations have implemented e-commerce in the hope of improving decision making, lowering costs and improving customer satisfaction levels. A major benefit of e-commerce is cost reduction as Tagliavini et al (2001) pointed out "a correct adoption of-commerce could lead to a reduction of transaction costs and coordination costs". Also, Davies and Garcia (1999) argue that benefits for SME’s are faster communication, effective dissemination and collection of information and closer relationships throughout the supply chain.
Meanwhile, Liu and Arnett (2000) suggested theatre-commerce can help business organisations cut costs, interact directly with customers, run more smoothly and in a timelier manner, and even better, it can help an organization outperform its competition".
Further driving factors of e-commerce for SME’s are also identified by Auger and Gallagher (1997) as follows: access to an Affluent Customer Base, lower Information Dissemination Costs, lower Transaction Costs, broader Market Reach, increased Service, additional Channels for Customer Feedback and Consumer and Market Research.
Reducing costs, better communication with customers, access to larger customer base, and extended market are the major benefits of using-commerce agreed by a number of authors. At the same time, the more detailed benefits of e-commerce to SME’s are summarized as follows:
• Innovative products, better services and exploring new market opportunities;
• Shift in value added and content components of what is made and sold;
• Changes to economies of scale and the traditional barriers and advantages of large enterprises;
• Untying work functions from specific locations and time constraints;
• Flattening and disaggregating of organisational structures;
• Scope for customization at low cost; and
• Commercialization of in-house content and know-how.
However, a study conducted by Poon (1999) found that the benefits of Internet commerce could be classified into long-term and short-term benefits, direct and indirect benefits. He suggested that the short-term benefits should be achieved within a few months, while the long-term benefits may take longer and unable to be predicted. The use of e-commerce can benefit SME’s in terms of reducing costs and access to larger customer base in the short term, and business transformation in the future.
The use of e-commerce will also have a great deal of effect on the SME’s' business activities as Tagliavini et al. (2001)indicated that "E-Commerce has an important influence on SME’s; range of activity, providing increased competition on a global scale and allowing them to access wider markets". From the above literature it could be rightly said that E-Commerce adoption is an essential business strategy for SME’s to obtain competitive advantage.
Opportunities and Threats faced by SME’s
"There are major opportunities for new entrepreneurs and small- to medium-sized businesses to flourish in the maturing of e-commerce"(Drew, 2003). The use of e-commerce has provided a variety of benefits for SME’s as well as a number of potential opportunities. “The Internet’s usually presented as an opportunity for smaller firms because it helps reduce transaction costs and level the playing field" (Evans and Wurster, 1997). The opportunities for SME’s include expanding scope of marketing, wider and richer communication, reaching new market and reducing cost of operations and partnering with suppliers (Drew, 2003).
According to a report conducted by Prevost (1998), there are variety of opportunities added to SME’s, including efficiency and productivity for business process, the development of new market opportunity (B2C andB2B) as well as access to global market. Also, the e-commerce give SME’s opportunity to exploit competitive and know how benefits as suggested by Tagliavini et al. (2001). Nevertheless, how to use e-commerce as an opportunity to SME’s will depend on the industry and firm factor implied by Drew (2003).
These influenced factors include: The smaller firm’s technical and Internet knowledge; The rate at which the market is growing; The pace of innovation and change in the industry; The technical and Internet strengths of the larger competitors; The sources of competitive advantage for the smaller business; The strategic intent of the larger competitors; and The structure of the industry in which the firm competes.
Generally, the market, industry structure, and macro-environment will be the major influenced factors that decide e-commerce as an opportunity or threat for SME’s. Therefore, although it is not doubt that e-commerce has provided a huge opportunity for SME’s in the range of business activities, the external and internal factors must be considered strategically while adopting e-commerce. However, Tagliaviniet al (2001) argued, "the real opportunity of E-Commerce adoption force’s is still unclear"(p.211).
The significant opportunity for SME’s is to extend existing market to international market addressed by a number of authors (OECD, 1998;Webb and Sawyer, 1998; Walczuch et al., 2000 and Giessen et al., 2001).Giessen (2001) remarks “the twin phenomena of globalization and-commerce pose new challenges and provide competitive opportunities for large and small firms alike”. It is an imperative opportunity force’s to access the global market, as the one of the important feature of e-commerce is global reach as stated by Loudon (2001).
Therefore, ME’s are expecting the opportunity to extend existing market into globalization by using e-commerce. Undoubtedly, Internet has provided chance for SME’s to diminish the entry barrier and costs into global trading market as "electronic commerce offers companies the possibility to sell internationally, effectively removing constraints of time and location and substantially enhancing their competitiveness", and it is the most imperative opportunity for SME’s to increase productivity andthe capability to entry markets and discover business partners globally(OECD, 1998).
Indeed, the reach of global market is an exciting opportunity for SME’s to grow in terms of the size of company and competitive advantage. However, Jutland et al. (2002) proclaims that “globalization pressures arising from e-commerce operations often mean that SME’s have to acquire international trade knowledge". Publishing company’s website in the Internet is simple but trading in the global market is not so simple task for any of the SME’s. As Teethe and Burn (2001) points out that "the challenge for SME’s are complicated byte general lack of clearly defined frameworks for analysis of the entire processes of strategy building, implementation and management with aspect to the emergent global information economy".
However-commerce truly provides the great opportunity for SME’s to increase competence with lager firms in variety of business opportunities as well as an opportunity to extend trading geography. The various opportunities offered by e-commerce are the significant riving factors that encourage a firm to adopt e-commerce as its business operation.
Although the use of e-commerce has provided a huge opportunity force’s in range of business activities, e-commerce might become a threat for SME’s while trying to explore a variety of opportunity by using-commerce. As Drew (2003) indicates there are a number of threats of-commerce for SME’s.
These threats include increasing competition from larger firms as "the new medium allows larger firms to mimic the traditional strengths of SME’s in serving niche markets, developing customer intimacy and exploiting local knowledge", and " for a regional firm, which previously may have had little local competition, may be faced with new threats from across the country or the globe" (Drew,2003). In fact, small firms have less competitive advantage than larger firm as Davies and Garcia-Sierra (1999) points out SME’s had fewer resources compared to larger firms.
Meanwhile, a survey conducted booed (1998) found that "it is more difficult for SME’s to reach the Benefits of e-commerce than for larger firms". This could be because ME’s are having less resource than larger firms. Therefore, the opportunity provided by e-commerce might present in different result between SME’s and larger firms.
For SME’s, e-commerce might present as a threat because of a lack of resource and a lack of essential knowledge of how to do business on line. E-Commerce provides opportunities and benefits for SME’s but the new threats also come from using it.
4. Research Methodology
A good research methodology is a general plan of how the researcher will go about answering the research questions considering the sources to collect data and the constraints that one might have (access to data, time, location and money, ethical issues etc.). It should reflect the fact that the researcher has thought carefully about why particular strategy has been employed. A collection of methodologies was used to carry out this research. Both primary and secondary research was carried out for this purpose.
Primary research is research that is being carried out specifically to answer a particular research question. Primary research is carried out by the researcher himself/herself and is not based on others work. It’s often termed as first hand research and observation. Few approaches to primary research are: focus groups, surveys, experiments, interviewed. Primary research is much more expensive than secondary research[Research].
Secondary research is based on information gathered from studies previously performed by other researchers or other organizations. Secondary sources may vary from libraries, Web, books, publications, magazines and newspapers. Secondary research is cheaper than primary research; it's not as accurate, or as useful, as specific, primary research [Research].
The first stage of the research comprised of collecting secondary data from the literature review. According to Sharp and Howard (1996), two major reasons exist for reviewing the literature. First, the preliminary search helps to generate and refine the research ideas. And secondly, a critical review is a part of the research process. Like most research projects, literature review was an early activity in this research.
After the initial literature search, the researcher was able to redefine the parameters more precisely and undertake further searches, keeping in mind the research objective and goal. The literature review helped in developing a good understanding and insight into the previous research done on this topic and the trends that have emerged.
The next stage of the research comprised of short listing of the Small firms where the survey had to be carried out. Companies which have anon line presence as well as those which run business offline i.e. which operate on ‘bricks and mortar’ model were selected. The central idea of the research was to find out the overall e-business transition process of the Small firms who have already achieved it and others who are undergoing the change. Also the barriers to the adoption of e-commerce in small firms were identified.
A two stage triangulation research method was used in which interviewing of small groups (unstructured interviews) was followed by detailed questionnaire, testing quantitatively a much larger sample of employees and consumers. This method of qualitative and quantitative method, advocated by Burns and Grove (1997) is a relatively new approach and is often called the triangulation method. Interviews will help to gather valid and reliable data relevant to the research objectives. According to Saunders et al (2003), interviews may be categorized into three categories:
1. Structured interviews – Use questionnaires based on a predetermined and identical set of questions.
2. Semi structured interviews – The researcher has a list of themes and topics to cover, although these may vary from interview to interview depending upon the organizational context. The order of questions may also be varied depending upon the flow of conversation. Some new questions may also arise due to discussions.
3. Unstructured interviews – These interviews are informal. There is no predetermined list of questions. The interviewee is free to talk about events, behaviour and beliefs in relation to the research topic. This type of interview is also known as informant interview because it’s the interviewee’s perception which leads to the conduct of the interview. It is also known as in depth interview because it’s used to explore in-depth a general area in which the researcher is interested.
In this research, both the unstructured and structured interviews were incorporated which helped in ensuring a smooth and friendly atmosphere while taking the interviews. These interviews were then coded and analyzed to produce a set of questionnaire with reduction of categories to a smaller number of dimensions by means of analysis.
The main emphasis in triangulation is on combining methods, e.g. Survey questionnaires with in-depth interviews. The idea behind taking two kinds of data collection method is that if diverse kinds of data support the same conclusion, confidence in the conclusions is increased. The predominant advantage of the interview is its adaptability. An adept interviewer can follow up ideas, probe responses and investigate motives and feelings which the questionnaire can never do. The way in which a response is made can reveal valuable information[Bell, 1987].
There are a few disadvantages as well. Interviews are time consuming and expensive and therefore only a small number of people can be interviewed within a span of time [Bell, 1987; Hussey, Jan Hussey, R., 1997]. Questionnaire is the most popular method of collecting data. It is less expensive and less time consuming than conducting interviews and very large samples can be covered.
Therefore, a survey was carried out and a set of questionnaire was also prepared to collect primary data. Bell (1993) says that surveys can provide answers to questions like What, Where, When, And How. It tries to elaborate the problems of ‘representativeness’ from other approaches like case studies or most of the qualitative approaches. This approach can be termed as fact finding mission and may contribute little towards the development of a hypotheses or shaping theory.
The results from the survey can definitely be used to test a hypotheses or theory. The data here is primarily quantitative but may also be qualitative in nature as it represents peoples view about an issue. Questionnaires are generally used for the purpose of data collection. The different distribution techniques as described by Hussey and Hussey (1997) were followed. The questionnaires were circulated to the employees and consumers through Post, Telephone, face-to-face, Group distribution, email distribution and individual distribution.
Hussey and Hussey (1997) identify some important factors to be considered while using questionnaire. These are- Sample size, Types of questions, Wordings, Design, including instruction, Wording of any accompanying letter, Method of distribution and return, Method of collecting and analysing, Actions to be taken if questionnaire is not returned. All of these factors were considered while preparing the final set of questionnaire.
Step by Step Methodology
1. Literature Review – Secondary Data was collected to generate and refine the research ideas
2.Short listing - The next stage of the research comprised of shortlisting of the institutions/small firms where the case study/survey will be carried out.
3. Unstructured and Structured Interviews – The next stage was of data collection which consisted of in-depth interviews with a representative cross-section of employees and consumers who revealed variables to be tested at the next stage of the research project.
4. Questionnaire– At the next stage of the research project questionnaires were sent to the employees and consumers to get feedback.
5. Analysis – The quantitative data was thoroughly analysed.
What data need to be collected and how to analyse them are crucial to determine the design of a questionnaire. Unlike in-depth interviews, the questions asked in a questionnaire need to be defined precisely prior to data collection. According to Dill man (1978 cited in Saunders al., 2000, p.285), there are four distinct types of variables that can be gathered through questionnaire: attitude, belief, behaviour and attribute. Attitude variables indicate how respondents feel about something. Belief variables record what respondents consider or believes true or false.
Behaviour variables indicate what people did in the past, do now or will do in the future. And attitude variables contain data about the respondents’ characteristics. Two sets of questionnaire were prepared to collect primary data (interviews& survey questionnaire) about consumers and organisations behaviour towards-commerce. The design of a questionnaire differs according to how it’s going to be administered i.e. the amount of contact the researcher will have with the respondents. In this respect, the design of questionnaire can be divided into categories:
1. Self-administered: These questionnaires are completed by the respondents without the intervention of the researcher. Such questionnaires are delivered to the respondents through email, Internet or by post and are returned accordingly.
2. Interviewed administered: These questionnaires are recorded by the interviewer on the basis of the respondents’ answers. For example :Telephone questionnaires in which telephonic interview is taken and structured interviews in which the researcher meets the respondent facet face and ask questions.
In this research, the choice of questionnaire was determined by number of factors like the time available to complete the data collection, financial implications of data collection and entry, availability of interviewers and ease of automating data entry. Keeping all these factors in mind, self-administered questionnaire was chosen to be distributed to the sample through post, email, Internet and telephone.
5. Research Analysis
Research Analysis and Presentation
Data collected from any research would require a good analysis to infer some logical arguments and make a sound conclusion. Qualitative analysis is a process of reviewing, synthesizing and interpreting data to describe and explain the phenomena or social worlds being studied. As Teach  states, the differing analytical procedures can be grouped into content, discovery and meaning-focused approaches.
No matter which approach is used, just as with data collection methods, the rigour of the analytical procedures depends on their adequacy and transparency. Qualitative research findings are presented as textual descriptions that should illuminate the subjective meanings of the phenomena, or social world, being studied, but which should also place the findings in context [Pope et al, 1998], so as to represent the real world of those studied and in which their lived experiences are embedded.
The objectives and process of the research methodology for this study have been discussed in the previous chapters. This chapter aims to present and analyse the data collected with the survey instrument. The completed work is presented in a well structured report format using visual aids like pictures and tables. The author has tried to make every possible effort to keep the report devoid of any technical jargon.
Consumer Survey Analysis
The questionnaire was attached to the electronic emails and sent to the convenience of 50 students in the U.K. In each email the purpose and how to answer the questionnaire were described, and they were also asked to distribute the questionnaire to their friends and family. One follow-up email reminder was sent to non-responsive individuals after five days. 42 responses were received.
The sample for the study consisted of students, full time workers and also some part-time workers. Around 60% of the sample was men and most of them were below 30 years. The questionnaire was sent to the sample through email and the responses were collected and analysed through the survey software Peruses.
The questionnaire was divided into different sections focusing on Internet self-efficacy, Online purchase, Barriers or Limitations of Purchasing Products Online, Motivation of Purchasing Online, Perceived Web security and other features valued by customers and About Yourself. The Results indicate several trends in overall components perceived as useful to the online shoppers. The overall research questions have been used to organize the presentation of the data.
Section 1: Internet self-efficacy (Computer Training/ Access to Email/ Experience/ Confidence)
This section covered questions on the availability and accessibility to Internet as well as the confidence in using the Internet.
1. How long have you been using the Internet?
2. How often do you use Internet?
3. How confident do you feel using the Internet?
There has been significant development in terms of the Internet user population and Internet usage since the last 10 years. Almost 50% of the sample has been using Internet for the past 3-5 years (as shown in the given below figure).
Since most of the respondents were students, more than 50% of the sample said that they used the Internet at least once a day (as shown in the given below figure). And almost 70% of the sample was confident in using the Internet.
4. How often do you use the following on the Internet?
In order to investigate the respondent’s current online activities andthe degree to which online shopping is used, they were asked to state their primary purpose of using the Internet. This question had multiple responses. The options given for this question were: Research a topic, Reading articles/newspapers, looking for jobs, Online Shopping, Obtaining information about products, Planning Travel and finding about careers.
Results of the study indicate that the majority of the participants used Internet for planning travel which was closely followed by Gathering information on Jobs/Careers. Around 22% (12/56)of the sample said that they never use the Internet for shopping, while60% of them used Internet for shopping and the rest 20 % were not very keen for Internet shopping.
Section 2: Online Purchase
The Internet offers a new, additional marketing communications channel by which to inform customers of the product information and assist them in the buying decision. It is important for Internet retailers to gain insight into the consumers’ preference for different online marketing communication approaches. Thus they can employ the most appropriate and effective approaches to attract consumers and facilitate their purchase decision making.
Some authors (Armstrong and Hagel, 1996; Chaffey teal., 2000) suggest that building virtual communities of the most involved and loyal customers will be the key to success for retailing on the Internet. However, many of these community efforts have limited commercial abilities. Wolfinbarger and Gully (2001) argue that a high-involved product area or products with an enthusiast base will draw a related community that may be commercially feasible.
This section covered questions on the usability and usage of Internets well as preference towards online or traditional shopping. It also aims to analyse the online purchasers’ behaviour and attitude towards Internet retailing, especially their perception of the important factors to support their online purchase decision making at different stages.
5. Have you ever purchased a product through Internet?
More than 60% of the participants had purchased products or services through the Internet (shown in the given below figure). Li et al.(1999) concluded that consumers who buy online are better educated than those Internet users who do not, and income is higher for web buyers than non-web buyers.
6. If yes, how often do you buy product on the Internet?
Out of the 36 respondents who said that they do buy products online, 25of them said that they buy products online just once a year and 11 of them said that they buy once a month. While none of them buy products online every week (as shown in given below figure)
7. In general, what kind of shopping mode do you like/prefer?
When asked what kind of shopping mode do they like/prefer, the study revealed that around 40% of the participants like traditional shopping,23% like online shopping and the rest like a mixture of both.(as shown in given below figure)
Section 3 - Barriers or Limitations of Purchasing Products Online
This section aimed to find out the limitations and barriers to online purchase. The respondents were asked the following question.
8. Reasons, why you do not prefer/like online shopping (tick only one option for each reason)?
All those participants who said that they prefer Online shopping(13/56) were asked to skip this question as this would have been irrelevant to them. For this question, 43 responses were received from the participants.
As can be seen in the given below Table more than 80% of the participants disagreed to the statement that they do not know about the facility of internet shopping or they do not have accessibility to Internet. Also they did not seem to be worried about their email boxes being bombarded with updates and other notices if they register online on any website. Also the reason that the customers prefer discussing with the sales staff before buying any product did not prove any hindrance to the online shopping as almost 60% of the participants disagreed to the statement “I prefer to talk to sales staff before buying any product.”
Out of the many reasons for not liking online shopping, the two most voted one were the security/privacy issues and the lack of confidence in the quality of the product being delivered. 70% of the participants preferred to see the product first before buying. Almost 70% of the participants feel that online shopping is unreliable and there is wastage of time in delivery.
Strongly Agree Agree Neutral Disagree Strongly Disagree
I do not know about the facility.
3 4 0 35 1
I do not have accessibility to Internet.
0 0 12 31 0
I find it difficult to navigate smoothly.
8 5 17 6 7
I feel Internet accessibility is still expensive.
1 11 12 16 3
I find the traditional way of shopping more convenient.
6 15 15 6 1
I prefer to see the product first before buying.
19 11 5 8 0
I prefer to go out shopping with my friends and I like to take their advice before buying anything.
5 17 8 12 1
I do not get enough product information online.
13 14 6 10 0
Online Shopping seems unreliable to me.
22 9 2 10 0
Quality of product, after-sales service and the credit of the retailer cannot be guaranteed.
9 21 2 9 2
Inconvenient payment system.
11 8 21 2 1
Delivery is time wasting.
20 11 5 3 4
I prefer to talk to sales staff before buying any product.
1 11 4 21 6
I do not feel secure using my credit card information online.
22 11 5 2 3
I feel loss of privacy in an online transaction/medium.
3 28 6 6 0
I feel I would be bombarded with updates and other notices if I register online on any website.
12 6 0 21 4
I feel there is inconvenience of returning the products after purchased.
15 15 5 2 6
Shopping on street is more enjoyable than doing it online.
6 11 14 12 0
Section 4 - Motivation of Purchasing Online
This section aimed to find out the motivations and advantages of purchasing online. The respondents were asked the following question.
9. Reasons, why do you prefer/like online shopping (tick one option for each reason below)
All those participants who said that they prefer Traditional shopping(21/56) were asked to skip this question as this would have been irrelevant to them. For this question, 35 responses were received from the participants.
Among the different reasons for liking Online shopping (Convenient and accessible, relaxing shopping experience, less time consuming, efficient and fits in well with the work schedule), the two most voted reasons were that it is convenient and accessible all the time (82%)and that it is less time consuming (29/35).Also it was indicated that almost 50% of the participants think that the long distance of the shopping complex from their home is one of the reasons for preferring online shopping. Most of the participants either disagreed or were neutral to the statement that they like online shopping because they don’t have to consider safety travelling to and from the store. Also 65%of them believed that online shopping fits in well with their work schedule.
Topic Strongly Agree Agree Neutral Disagree Strongly Disagree
I prefer to do shopping anytime at home or office without going outside
11 9 2 12 1
Convenient and accessible all the time
17 12 2 3 1
More relaxing shopping experience.
21 7 3 4 0
Online shopping is easier and less time consuming.
10 19 4 2 0
Fits in well with my work schedule.
7 16 3 9 0
The shopping complex (city centre) is far away
5 12 14 3 1
Using the World Wide Web enables me to shop more efficiently.
4 6 21 4 0
I do not have to consider safety travelling to and from the store.
0 2 23 8 2
I prefer to shop alone and Internet gives me the option for that.
5 8 14 4 4
In online shopping there is convenience of delivery
2 17 2 13 1
I can do comparison at home or office without going to different actual shops
4 23 4 3 1
These figures demonstrate that Internet users are more convenience oriented. Time saving, effort saving, and a wide range of offerings that the Web environment provides are the most attractive for them. Convenience is the most frequently cited reason for those who want to shop online. Wolfinbarger and Gully (2001) classify online shoppers into two groups: goal or convenience-oriented buyers, and experience-motivated shoppers. Convenience-focused consumer behaviourist predominant on the Internet. And they are explicitly associated with four attributes of online shopping: convenience, informative ness,selection, and lack of sociality. Li et al. (1999) also find that the utilities in communication, distribution, and accessibility with Web shopping are more highly perceived by consumers who make online purchases than those who do not. Thus it is important for Internet retailers to focus on the easy access and organization of information provided.
Section 5 - Perceived Web security and other features valued by customers
Electronic commerce is fundamentally changing the way consumers shop and purchase products or services. For some consumers, shopping online has become part of their daily lives, whereas others are still on the way of considering it. It is necessary for Internet retailers to understand what factors determine that Internet users decide to purchase online. This section covered questions on the perceived Web security and other features on an Online shopping website valued by customers.
10. Do you feel secure sending personal/financial info across the Web?
A majority (88%) of the participants agreed that they feel insecure sending personal/financial information on the web. So retailers need to simplify the transaction process and enhance payment security on behalf of their consumers.
11. When visiting an online shopping website, which of the following features does you value?
Internet retailing web sites must provide adequate functional support to meet customer needs at each stage of their decision process. Once the factors that consumers perceived to be most important in each stage can be identified, online retailers will be able to focus their promotional tactics on those factors to support consumer decision-making.
It is apparent that different factors had different importance levels at each stage, thus overall mean values are likely to undervalue some significant factors at different stages. It might be more appropriate and valuable to analyse the most important factors at each stage.
When visiting an online shopping website, out of the many features available (Company Profile, Contact Address through email, Security Certificate, 24 Hour Customer Service, Free shipping and Handling, Protection of personal information, Policy Notes, Hyperlinks to other related information), the most popular and useful one valued by the participants was the ability to track the order placed (50/56).Post-purchase services are significantly important for online retailers to keep their customers’ satisfied. Srinivasan et al. (2002, p.43)argue that service failures are likely to affect future business because they weaken customer-company bonds and lower perception of service quality.
Detailed product Information (49/56), free shipping and handling(49/56), 24 hours Customer Service (46/56) and guaranteed delivery within a specified time frame (45/56) were the next most valued features of an online shopping website. This was followed by the Company profile (33/56) and Security Certificate (31/56). Policy notes and large selection of merchandise were the features which did not seem important to the participants. An appealing website design and functionality (17/56) also appeared to be not very important.
For Internet customers, search costs are dramatically reduced due tithe widespread availability of information. It is important that online retailers provide high quality, value added information with adequate help and support in the purchasing decision, but the information should be organized in a logical manner and easy to navigate.
Topic Strongly Agree Agree Neutral Disagree Strongly Disagree
Company Profile and overall Brand equity.
7 26 18 5 0
18 13 24 1 0
24 Hour Customer Service.
29 17 3 7 0
Large selection of merchandise.
3 9 21 21 2
Detailed product Information.
22 27 7 0 0
0 3 28 17 8
Free shipping and Handling.
19 30 7 0 0
How clearly the Return Policy is explained.
21 18 15 2 0
Delivery within a specified time frame (Guaranteed delivery).
28 17 9 2 0
Simplicity of process. (How simple it is to buy something online.)
7 19 13 15 2
Tracking (Does the site provide any feedback or a confirmation number once the order is placed.)
7 43 6 0 0
Protection of personal information.
5 21 21 7 2
Speed (How quickly each page, text and images appear.)
3 26 12 11 4
Functionality (Overall, how well the site seems to work.)
5 12 28 6 5
It was noticeable that a store’s reputation/company profile was listed as an important factor of choosing a particular website. The risk associated with online shopping and transaction is still perceived tube relatively high. In addition to product attributes such as quality and price, online consumers also take other factors into account inorder to decrease the risk involved when making a buying decision.
For Internet users, an online retailer’s reputation is of importance. Trusties associated with a lower perceived risk of online shopping, and consumers’ perception of the Internet retailer’s reputation and size is expected to affect their trust of the retailer (Jarvenpaa et al.,2000). Thus, online retailers should do what they can to impress the prospects of these two aspects with relevant marketing communications efforts. Approaches to comparison shopping or comparison matrix (CM)are considered to have a substantial impact on consumer decision-making, and are able to increase the quality of consumers’ evaluation(Haul and Thrifts, 2000).
Security of sensitive information/Security certificate (55%) was another important factor during the actual transaction stage. Availability of online help/24 hour customer service and protection of personal information were also considered to be important factors. Szymanski and His (2000) say in one of their papers that the online transaction security dominates the discussions on Internet commerce. Also credit-card security is emphasized as a major consideration by 75percent of Internet shoppers when deciding whether or not to purchase online.
Ranganathan and Antipathy (2002) also find that security and privacy have greater impact on the online purchase intention of consumers than information content and design of a retailing website. Therefore, online retailers must make necessary and adequate protection mechanisms to ensure their customers the security of transaction and sensitive information. Ease of handling orders and availability of online interactivity are another two important factors.
Many online buyers complain that they cannot accomplish their transactions, and websites fail to provide necessary help and interaction (Wolfmbargerand Gully, 2001). While Internet consumers enjoy the freedom and convenience of online shopping, they do sometimes require help needed to complete the purchase. Online retailers need to offer and support arrange of online interactive channels, such as e-mail, Web chat, call-back, and frequently asked questions.
12. Do you intend to purchase products from the internet in the near future?
The above graph is self-explanatory which shows that 44 % of the participants intend to purchase products from the internet in the near future while 32 % were not interested in buying anything form the Internet in the near future and the rest 23 % were not sure whether they will buy anything online or not..
Section 6 - About Yourself
This section covered questions to gather information on the number of males and females in the survey including their age and occupation.
13. What is your gender?
14. How old are you?
15. Are you?
These questions were important to see if the gender, age and occupation affect the choice of shopping or not. The sample consisted of 39 males and 17 females. Most of the participants (34/56) were below 30 years of age. 36 of the participants were students (as the questionnaire was distributed through email to students and they were free to circulate it to their family and friends), 8 were in full time employment, 7 were part-time employed and 4 were unemployed and 1 was retired.
The results revealed that mo
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