E Commerce In Different Perceptions Commerce Essay

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Electronic Commerce or E-commerce is growing extensively on Internet. Although the term of E-commerce might sound bizarre, in reality it has been familiar activity: buy books online. Whereas some of people take these simple activities every day, most of them may not be familiar on how SMEs have applied E-commerce into their business strategies to guarantee their survival in new global marketplace [33].

There are comprehensive literatures in focussing on SMEs and E-commerce [39, 46, 47, 48, 49, 50]. Despite variations in topics and approaches, these authors have concluded that SMEs are increasingly using Internet and this will radically change the way SMEs operate their businesses.

In this study, researcher focuses on B2C among SMEs due to: 1) B2C are much simpler to be implemented than B2B transactions for SMEs in Asia [52]; 2) B2C in Asia has becoming more important in today's businesses [93]; 3) less complicated technology is required in implementing B2C among SMEs [57].

2.2 Definitions of E-commerce

There are comprehensive literatures available in the area of E-commerce depending on the context and research objectives of the authors.

According to COM [1], E-commerce means "doing of business electronically". It encompasses many diverse activities from electronic trading of goods and services until after-sales service. Choi et al. viewed E-commerce as an "economic system where firms and consumers are aided by computers and networking technologies that enable an entirely new market" [2].

Table below are the summaries of E-commerce under different perception.

Table 1

E-COMMERCE IN DIFFERENT PERCEPTIONS

Perceptions

Descriptions

Business

To automate business transactions and workflows [5, 104]

On-line

To provide and extent the capability of buying and selling goods and its information through Internet and other on-line services [6, 105]

Service

To decrease costs while improving the quality of goods and increasing the speed of service and delivery at the same time (e.g.: Dell uses E-commerce to optimise their service capabilities direct to customers while it can save costs up to 70%) [104]

Communications

To deliver up-to-date information of products/services and payments over communication networks [4, 40, 46]

In this study, researcher have taken two definitions of E-commerce from Kalakota and Ngai et al. [105, 107] and adapted them in B2C context:

"The sharing of information and the process of buying and selling goods or services by electronic data transmission through Internet"

E-commerce principally covers two concepts, i.e. B2B and B2C.

Business to Business transactions (B2B) simply means businesses selling to other businesses [6], e.g. manufacturers selling to wholesalers (www.dell.com); wholesalers selling to retailers; office suppliers selling to other offices (MyBiz.com); etc.

Business to Consumer transactions (B2C) means businesses selling to consumers, usually in the form of online shops [6], e.g. music online shop (www.onlinemusic.com) or eBay (www.ebay.com).

The difference between a web site and an E-commerce site is that

an ordinary web site offers consumer with only information and purchasing options which are available off-line [5] while an E-commerce web site offers not only current information but also provides secure options to complete the transaction online [64].

2.3 Statistics

Before explaining further about the aspects of E-commerce, it is important to understand the current status of E-commerce around the world because it will give a basic idea on how the penetration level of E-commerce is taken place in different countries.

2.3.1 E-commerce Usage in Developed Vs Developing Countries

According to UNTACD research [7], the global number of Internet users continued to grow in 2002, reaching 591 million people at year's end. Developed countries continue to experience faster growth in the number of Internet users (32 percent), partly because of their demographic patterns (younger populations, faster overall population growth). If current trends continue, Internet users in developing countries could constitute 50 percent of the world total in the next five years. In developing countries, the figure is eight times lower [7]. Forecasts the value of E-commerce in 2003 were ranged between $1,408 billion and $3,878 billion, with growth projections would be $12,837 billion by 2006.

2.3.2 E-commerce Usage in Asia

IDC [24] reported that E-commerce revenues in Asia will not come close to US or European level. The growth of E-commerce will be slower in Asia due to infrastructure, Internet access, funds, different banking rules, tax structures and other issues [54]. There is a strong interest of E-commerce in the region, but some experts suggested that Asia should focus more to B2B transactions [59, 63, 68, 69]. Another studies noted that B2C level in Asia-Pacific region remain modest in comparison to B2B transactions [69, 87]. According to some estimates, B2C revenues amounted to $15 billion in 2002, total about $26 billion in 2003 [7]. This would represent about 10 percent of global B2C online sales. The vast majority of these volumes were generated by Japan, Australia and Korea [24]. In the more dynamic economies of the Asia-Pacific region, like Singapore and Hong Kong, the adoption of E-commerce is more perceived by companies as the natural future of business [8, 39, 44, 87].

2.4 Small and Medium Sized Enterprises (SMEs)

There are many theories regarding SMEs definition but there are no exact definitions. The definition may vary among countries along with the differences in economic level of the countries [14, 51, 54, 76, 79].

According to EU Commission [13, 51], to be classified as an SME:

"an enterprise has to satisfy the criteria for the number of employees (usually up to 250 employees) and one of the two financial criteria, either turnover total (up to 7 million ECUs) or balance-sheet total (up to 5 million ECUs)"

Similar description of SMEs also used by Bolton Report 1971 [10][5].

"a small firm is an independent business, managed by its owner or partly owners and having a small market share"

Table below summarizes the differences of SMEs' definition in Asia-Pacific.

Table 2

DEFINITIONS of SMEs in ASIA-PACIFIC [9]

Country

Definition of SME

Measurement

Indonesia

Less than 100 employees

Employment

Korea

Manufacturing - less than 300 employees

Services - less than 20 employees

Employment

Malaysia

Varies. Turnover - less than RM 25 million and 150 employees. Different for Bumi Putra enterprises

Shareholders, Funds and Employment

Philippines

Less than 200 employees, P$ 40 million

Assets and Employment

Singapore

Manufacturing - less than S$12 million fixed assets

Services - less than 100 employees

Assets and Employment

Taipei

Manufacturing - less than NT$ 40 million paid up capital, and less than total assets of NT$120 million. In business, transport, and other services-sales of less than NT$ 40 million.

Paid up capital, Assets and Sales

Thailand

Less than 200 employees for labour intensive

Less than 100m Baht for capital intensive

Employment and Capital

2.4.1 SMEs in Malaysia

In Malaysia, the emphasis among SMEs is mainly on the manufacturing sector. SMEs in Malaysia are defined as:

"Manufacturing entities with shareholders' fund (paid-up share capital: capital reserves; general reserves and retained/undistributed profits) of not exceeding RM [1] 2.5 million (US$1 = RM2.58)" [16]

Malaysian SMEs accounted for 93.8 per cent of all establishments in the manufacturing sector as shown in Appendix 4. Of the total number of SMEs, small enterprises comprised 76.0 percent, while medium companies accounted 17.8 percent of all manufacturing establishments. In terms of manufacturing output and employment, small enterprises accounted for 3.9 percent and 11.4 percent, while medium firms contributed 23.4 percent and 27.5 percent respectively [11].

SMEs in service sector are also important in Malaysian economic growth. Service sector such as banking and tourism [8] are one of the most significant contributions to the Malaysian GDP.

Malaysia has recognized the importance of SME development since early 1960s. At first, the main purpose of SME development policies was to establish new companies, especially Bumiputra [2] and foster them aggressively. Not until 1990s, Malaysia started full attempts to further strengthen the supporting industry by fostering local SMEs.

2.4.3 SMEs in Indonesia

Indonesian government defines SMEs as firms with:

"Total assets up to Rp [3] . 200 million (US $ 22,500 [4] ) excluding land and building or the total annual sales are not more than Rp. 1 billion (US $ 112,700)' [14]. While the medium enterprises are 'firms with total assets more than Rp. 200 million but not exceed Rp. 10 billion (US $ 1.127 million) excluding land and buildings" [14]

Of Indonesia's 2.8 million industrial establishments, 2.5 million are micro-enterprises and 245,000 are SMEs, together accounting for 60 percent of manufacturing employment [15]. Of more than 40 million enterprises, 99.99 percent is small and medium enterprises and only 0.01 percent is corporation [15]. In other words, almost all of business sectors in Indonesia are SMEs. SMEs contribute significantly to the development as 54.74 percent of GDP comes from these enterprises [14].

Government recognise the importance of SMEs and begin to focus on the effort to enhance the functions of SMEs. However, Indonesian SMEs still have limited access to high quality business services [15]. They also face high transaction/investment costs due to burdensome of government licensing and regulation requirements.

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