External 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

	Brought to you by Team-Fly

The external factors embody those factors that affect the environment in which a business operates. The external factors do not directly affect the ability to conduct organisational change; however, the external factors can influence the potential to derive e-commerce benefit from e-commerce utilisation. The three external factors that have been identified in the case analysis are the nature of the supply chain, the industry in which the SME operates, and the level of government assistance.

Clients/Customers

The nature of the clients or customers targeted by the organisation affects the potential benefits derived from e-commerce. Organisations that pursue increased sales revenue from the Internet need to acquire a critical mass of customers to gain the inherent benefits of e-commerce. This is particularly important for start-up e-commerce businesses that have no prior trading background. Alternatively, established businesses that have existing client bases can reap potential e-commerce benefits earlier by improving their client relationships and transaction methods. In each scenario it is important that new or existing clients have the facilities and the desire to trade electronically with the organisation. If a core customer market is unlikely to embrace e-commerce and the focus of the e-commerce activity is customer-centric, the possible benefits derived from e-commerce can be limited. However, those SMEs that have developed their e-commerce systems in consultations with major clients can expect to receive earlier success and associated rewards from their e-commerce systems.

Supply Chain

The ability to derive e-commerce benefits is influenced not only by the customers, but also by the businesses and individuals that form the organisation's supply chain. In this research, the use of phone and facsimile dominated the communication method between suppliers and SMEs included in the case study. Some of the case study participants were distributors and wholesalers, and were keen to push the use of e-commerce onto their respective resellers; however, many resellers lacked the capacity or desire to be on-line. Until a critical mass of e-commerce customers and suppliers is evident, the draconian nature of the many supply chains remains a significant hurdle in procuring the full potential benefits of e-commerce.

Industry

Industry can assist SMEs in gaining critical mass by supporting and encouraging e-commerce initiatives. None of the cases indicated that they received or sought help from the industry when developing their e-commerce application. One problem identified by a business owner suggested that when large business enterprises dominate the industry, SMEs have very little power, individually, to change the supply arrangements. However, if a SME is a large customer, they can influence to some degree their supply arrangements.

Government

The government can provide e-commerce assistance in a number of ways. E-commerce education and awareness programs are beneficial to break down the barriers of misinformation and e-commerce adoption fears. Direct injection of capital to help subsidise initial e-commerce efforts would help many of the smaller businesses. The development of role models or e-commerce champions would also prove beneficial.

External Support Services

The SMEs included in this research have reported a mixed array of services provided by Internet service providers (ISP), Web developers and e-commerce consultants. Problems with experience and service levels by ISPs were highlighted as the largest external issue by many case studies, particularly those SMEs in the small and micro sectors where IT skills and experience of management were marginal. The businesses that developed the majority of their e-commerce applications in-house had the least amount of problems.

	Brought to you by Team-Fly