The Four-Phase Model of E-Commerce Utilisation among Smes

Chapter 8 - An Analysis of Factors that Influence the Ability of SMEs to Derive Benefit in Four Phases of Electronic Commerce: 34 Australian Case Studies
Managing IT in Government, Business & Communities
by Gerry Gingrich (ed)
Idea Group Publishing 2003

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The Four-Phase Model of E-Commerce Utilisation among Smes

A preliminary analysis of the 34 case studies suggests that SME Web-based e-commerce can be categorised into four phases. The phases can be described as a static Web presence, an adjunct to traditional business, substantial reengineering of business processes, and a virtual enterprise (Chau, 2001). SMEs engaged in no Web-based e-commerce are considered to be located in position Po. The term phase is used to highlight that SMEs did not necessarily undertake a staged approach to using e-commerce but embarked on the use of e-commerce at any one of the phases. A SME can migrate between phases or jump phases depending on the level of organisational transformation applied.

Position P0:

Conventional SME utilising no Web based EC

SMEs in this phase do not incorporate any Web-based e-commerce; however, they may adopt basic e-commerce banking functions such as electronic funds transfer (EFT), EFT point of sale (EFTPOS), phone banking, and electronic bill payment (BPAY).

Phase P1: SMEs incorporate a static Web presence

Phase one SMEs consider e-commerce will influence their organisation in their industry in the future and are keen to experiment or gain a presence for little cost or ongoing maintenance. These SMEs incorporate basic e-commerce initiatives, typically a Web site providing information on organisational background, e-mail contacts, and information on product and services. These Web sites tend to be static and require little maintenance.

Phase P2: SMEs add dynamic and interactive functionality to their use of e-commerce

In phase two SMEs demonstrate an interactive utilisation of e-commerce on their Web site. The use of e-commerce is not integrated directly into existing information systems and their core business processes are unlikely to change as a result of the e-commerce activity. The organisation's use of e-commerce is considered to be experimental and is not highlighted as a strategic move. By not incorporating e-commerce applications directly with back-end systems, the organisation can insulate it self from potential security threats; however, the potential benefits derived from e-commerce are limited due to minimal integration of e-commerce into existing business processes. SMEs consider their e-commerce activities to benefit in the long term and do not anticipate substantial short-term gains.

Phase P3: SMEs engage in substantial re-engineering of business processes to accommodate e-commerce initiatives

SMEs located at phase three engage in advanced use of e-commerce utilisation. The SMEs have an in-depth understanding of their business and what benefits e-commerce technologies can provide. Management has a clear e-commerce strategy that links directly to their broader implicit or explicit business strategy. The e-commerce applications require substantial capital/resource expenditure and involve significant organisational transformation in core business processes. Traditional business processes and existing information systems are altered to accommodate the e-commerce systems. The degree of organisational transformation is markedly higher than cases found in phase two.

Phase P4: Virtual business enterprises

The use of e-commerce is central to business operations for SMEs located in phase four. The organisation uses e-commerce as a trading platform and communication medium for all transactions. The development of e-commerce applications is designed to harness the most benefit from e-commerce. Virtual SMEs may be operating from home or other non-commercial settings, substantially reducing the overheads incurred in traditional business operations. Virtual organisations by nature readily embrace new technologies for computer-mediated communications (Barnatt, 1997).

This study has identified two groups of SMEs that may be located in phase four. One group of SMEs consists of established businesses that evolved from a traditional business model to a virtual trading model, where a new business entity is created to trading exclusively online. These types of virtual SMEs may not have resided at any of the previous phases. The second group of phase four SMEs can consist of SMEs that were previously located in another phase (1,2 or 3) and have migrated to phase four.

SMEs that trade in information-related products are highly suited to operating in this virtual enterprise located in phase four.

New start-up e-commerce businesses (dot.coms) with no prior trading history may potentially acquire the same benefits received by phase four SMEs without undergoing the extensive organisational transformations encountered by phase four organisations. These dot.com SMEs have the advantage of designing their business to fully embrace e-commerce technologies; however, they are disadvantaged by not having an establish client base.

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