Internal Factors

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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Organisational Factors

The Role of Management

Management plays a pivotal role in the e-commerce decision-making process. The role of management plays an important role in the implementation and utilisation of e-commerce. Management skills, leadership qualities and strategic direction directly impact on the ability of a SME to engage in e-commerce. Management skills relate to the attributes of the managers of each business. The level of enthusiasm for e-commerce and interest in technology and e-commerce were characteristics that reflect on the level of e-commerce knowledge and understanding possessed by management in the case studies. In all phases management believes that e-commerce can provide benefit to the business; however, the sophistication of e-commerce implementation varies across phases. Phase one businesses use e-commerce in a minimal manner; managers view e-commerce as a support tool as opposed to a mechanism to enhance and extend business processes. In contrast, management support for e-commerce differs substantially in phases two, three, and four. Managers in these phases were found to be more pro-active and enthusiastic with their use of e-commerce. The lack of technical experience and knowledge of e-commerce did not dictate the actual use of e-commerce within the organisations.

The E-Commerce Driver (Why is E-Commerce Used by SMEs?)

The reasons for using e-commerce directly influence the potential gains from e-commerce. The driver for e-commerce varied considerably across all cases. Access to global markets, which can potentially increase sales, was a consistent driver, particularly for SMEs located in phases one and two. The use of e-commerce to enhance customer service was another common theme, by providing an alternative and convenient trading and communication methods. Sophisticated users of e-commerce found in phases three and four considered e-commerce as a strategic tool aimed at reducing operational costs and minimising transaction inefficiencies.

The E-Commerce Strategy (How is E-Commerce Used by SMEs?)

How e-commerce is applied within the organisation will affect the possible benefits form e-commerce. Analysis of the case studies revealed two distinct strategic orientations with the organisational use of e-commerce. Businesses located in phase one and phase two predominantly view e-commerce with an experimental approach, investigating and exploring how e-commerce could be used within the business. E-commerce is used to complement marketing and sales functions; it is applied independently of existing IS systems with no formal integration between existing back office systems and their e-commerce applications.

Alternatively, managers in phase three and phase four businesses consider e-commerce as a strategic device to extend implicit business strategies to reduce costs, promote greater efficiencies, and enhance customer services. Businesses positioned in phase four rely totally on the Internet to facilitate not only their e-commerce applications, but also their whole business infrastructure. E-commerce is used as a strategic platform central to their business operations. Without the Internet these businesses would not exist in their current state.

Internal Resources Available to Conduct E-Commerce

The amount of internal resources available for e-commerce activities varied substantially across all phases. The ability of SMEs to allocate resources for e-commerce initiatives closely correlates to the business size. In terms of available resources, medium-sized businesses possess a greater capacity to conduct e-commerce than micro and small businesses. However, analysis of the cases shows that the capacity to conduct comprehensive e-commerce activities is not a reflection on actual e-commerce activities executed.

Small and micro businesses that employ few staff find it particularly hard to allocate capital, time, and personnel to any venture outside core business activities (CEC, 1996). Some business owners/mangers that could not justify the costs associated with hiring external developers resorted to experimenting with e-commerce development (e.g., Microsoft Frontpage ) themselves.

Technological Factors

The Technological Infrastructure

The technological infrastructure and support is an integral element of e-commerce utilisation. The analysis revealed three types of e-commerce support and development skills amongst the 34 cases. The first type includes those businesses that designed, developed, and maintained their e-commerce applications in-house, which for many this meant after hours at home. Small businesses employing less than twenty employees and micro businesses employing less than five employees typify this scenario. A second group of businesses emerge that predominantly develop their e-commerce application internally and only seek external assistance when required. The third type of businesses employs the skills of professional e-commerce consultants and developers to design, implement, and host the e-commerce initiatives.

The financial constraint of employing external consultants and developers to build e-commerce applications can be a major deterrent for the vast majority of SMEs with little or no IT experience or knowledge. In these cases the decision to embark on e-commerce initiatives is large, financially. The SMEs in the study displayed a vast array of IT experience. In micro and small businesses the owner/ manager is often the first contact for IT support. As a result the owner/manger inevitably gains hands-on IT experience by necessity. Medium-sized businesses either possessed in-house IT experts or contracted IT expertise when required.

A SME is not required to own an elaborate IT infrastructure to conduct e-commerce. A computer with Internet access is all that is required for basic e-commerce activities. In four cases, SMEs used their home computer to develop and maintain their e-commerce applications. The ability to host the e-commerce application has not been a hurdle for the SMEs included in the case studies. Interviewees indicated that hosting costs were relatively minor in comparison to the costs of developing the initial e-commerce application.

The E-Commerce Application

The nature of the e-commerce application correlates closely with the driver and motivation to use e-commerce. Phase one and phase two businesses do not significantly alter their core business structure. Their use of e-commerce is reflected by their applications, which include electronic brochures, online stores, and product and service information. Phase three businesses exhibit a more comprehensive array of e-commerce applications, such as customer information systems, electronic procurement systems, and enhanced communication facilities. In phase four, e-commerce is paramount to the business' existence. Without the Internet and e-commerce, the business would not exist. These businesses rely on global and national markets to justify their business strategy. Their e-commerce strategy is their business strategy; without the Internet the business would not survive.

Table 2: External Factors Affecting SME Ability to Acquire E-Commerce Benefits

Clients/Customer The Ability of Clients to Conduct E-Commerce Public or Niche Market Size and Number of Clients (Critical Mass)	Industry Level of Industry Support for Change Information and Education Business Champions
Supply Chain Level of Automation in Supply Chain Size and Number of Participants (Critical Mass) Other Participants Internal Factors	Government Policy and E-Commerce Framework Type of Sector Strategy Level of Financial Aid
External Service Providers ISP Web Developers E-commerce Consultants

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